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tuart Company had Net Income for 2020 of $8,100,000. The firm invested $1,000,000 in manufacturing equipment during 2020. The equipment is being depreciated over five years using straight-line depreciation, starting in 2020. Assuming no other adjustments to cash flow than those mentioned here, create a statement of cash flows for 2020 with amounts in thousands. What is the Net Cash Flow in 2020

User Prajna Hegde
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1 Answer

12 votes
12 votes

Answer:

$7,300,000

Step-by-step explanation:

The net cash flow also known as the free cash flow is the amount of unused cash inflows of the firm which can be distributed to the providers of funds to the business, common stockholders , and debtholders as shown by the formula below:

net cash flow=net income+ annual depreciation-capital expenditure

The annual depreciation would be added back since it is not cash flow in the actual sense

net income=$8,100,000

capital expenditure=$1,000,000

annual depreciation=capital expenditure/useful life

useful life=5years

annual depreciation=$1,000,000/5

annual depreciation=$200,000

net cash flow=$8,100,000+$200,000-$1,000,000

net cash flow=$7,300,000

User Julius
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