(a) Compute free cash flow for Obermeyer Corporation. (Enter negative amount usi
ID: 2403147 • Letter: #
Question
(a)
Compute free cash flow for Obermeyer Corporation. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Statement of Cash Flows—Indirect Method
For the Year Ended December 31, 2017 Cash flows from operating activities Net income $55,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $8,900 Loss on disposal of equipment 8,300 Increase in inventory (4,700 ) Decrease in accounts receivable 3,000 Decrease in accounts payable (2,300 ) 13,200 Net cash provided by operating activities 68,200 Cash flows from investing activities Sale of investments 2,800 Purchase of equipment (25,000 ) Net cash used by investing activities (22,200 ) Cash flows from financing activities Issuance of stock 18,000 Payment on long-term note payable (10,000 ) Payment for dividends (17,000 ) Net cash used by financing activities (9,000 ) Net increase in cash 37,000 Cash at beginning of year 11,000 Cash at end of year $48,000
Explanation / Answer
Computation of free cash flow
Free cash flow= Cash flow from operations- Capital expenditure
Cash flow from operations= $ 68200
Capital Expenditure=$ 25000 (Purchase of equipment)
Therefore, Free cash flow=$ 68200 - $ 25000
= $ 43200
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