Question

Dora Inc. reported the following on the company's cash flow statement for 20Y6: Net cash flow from operating activities $350,000 Net cash flow used for investing activities (100,000) Net cash flow used for financing activities (200,000) Sixty percent of the cash flow used for investing activities was used to purchase property, plant, and equipment. What is the free cash flow for 20Y6?

Answer 1

Answer:

The free Cash Flow for the year 20Y6 amounts to $290,000

Explanation:

The free cash flow for the year 20Y6 is computed as:

Free Cash Flow for the year 20Y6 = Net cash flow from operating activities - Cash used to purchase the equipment, property and plant

= $350,000 - $60,000

= $290,000

where

Net cash flow from operating activities is $350,000

Cash used to purchase the equipment, property and plant is computed as:

Cash used to purchase the equipment, property and plant = 60% × Net cash flow used for the investing activities

= $100,000 × 60%)

= $60,000