Question

Vaughn Corporation engaged in the following cash transactions during 2025.

Sale of land and building $186,500
Purchase of treasury stock 44,900
Purchase of land 46,300
Payment of cash dividend 91,100
Purchase of equipment 61,200
Issuance of common stock 149,000
Retirement of bonds 101,200
Determine Vaughn's free cash flow, assuming that it reported net cash provided by operating activities of $404,130. (Show amount that
decrease cash flow with either a-sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Vaughn Corporation's free cash flow for 2025 is $296,630.

Step-by-step explanation:

To calculate Vaughn's free cash flow, we need to subtract the cash used for capital expenditures from the net cash provided by operating activities. Capital expenditures are the cash payments made for purchasing equipment and land. From the given information, the total cash used for capital expenditures is $61,200 + $46,300 = $107,500. Therefore, the free cash flow is $404,130 - $107,500 = $296,630.

Answer 2

To calculate Vaughn Corporation's free cash flow, we subtract the cash outflows for capital expenditures and cash dividends from the net cash provided by operating activities. The free cash flow for Vaughn Corporation in 2025 is $205,530.

Step-by-step explanation:

To determine Vaughn Corporation's free cash flow, we need to adjust the net cash provided by operating activities by subtracting cash outflows associated with capital expenditures and dividends. The relevant transactions include payment for land, equipment, and cash dividends. The purchase of treasury stock and retirement of bonds while they impact cash do not directly affect free cash flow.

Calculation of Free Cash Flow:

Net cash provided by operating activities: $404,130

Less: Purchase of land: ($46,300)

Less: Purchase of equipment: ($61,200)

Less: Payment of cash dividend: ($91,100)

Free Cash Flow = Net cash provided by operating activities - Purchase of land - Purchase of equipment - Payment of cash dividend

Free Cash Flow = $404,130 - $46,300 - $61,200 - $91,100

Free Cash Flow = $205,530