Question

In the current year, Mosely Company reported a net cash inflow from operating activities of $140,000. It also collected $10,000 from shareholders by issuing additional shares of its stock. It paid a $5,000 note payable, $25,000 for equipment, and $15,000 as dividends. What is the company’s free cash flow?

Answer 1

$115,000

Step-by-step explanation:

In calculating free cash flow the formula is stated below:

FCF=EBIT(1-tax rate)+depreciation and amortisation-changes in working capital-Capital Expenditure

In this scenarion only EBIT(earnings before interest and tax of $140,000) and capital expenditure are available.

By substituting the two known variables into the formula, the answer gives $115,000 as stated above.