Question

Nova Electrics anticipates cash flow from operating activities of $12 million in 20X1. It will need to spend $9.5 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $.40 million and preferred stock dividends at $.32 million.

a. What is the firm’s projected free cash flow for the year 20X1? (Enter your answer in millions of dollars rounded to 2 decimal places.)

Answer 1

$1.78 million

Step-by-step explanation:

Firm’s projected free cash flow for the year 20X1:

= cash flow from operating activities - capital investment - Common stock dividend - preferred stock dividend

= $12 million - $9.5 million - $0.40 million - $0.32 million

= $1.78 million

Therefore, the firm’s projected free cash flow for the year 20X1 is $1.78 million.