Balance Sheets as of December 31 2014 , 2013 Current Assets 210,000 157,500 Net

Question

Balance Sheets as of December 31 2014, 2013 Current Assets 210,000 157,500 Net Plant and Equipment 490,000, 472,500 Total Assets 700,000 630,000 Accounts Payable 35,000 37,800 Notes Payable 49,000 18,900 Accruals 21,000 44,100 Long-Term Bonds 182,000 151,200 Total Common Equity 413,000 378,000 Total Liabilities & Equity 700,000 630,000 Income Statement 2014 Earnings before interest and taxes 210,000.0 Depreciation and Amortization 24,500.0 Interest 18,200.0 Taxes 40% 76,720.0 Net Income 115,080.0 Other Information 2014 WACC 11.40% Number of shares outstanding 14,000 Price per share $22.13 What was 2014 free cash flow?

the BOLD are 2014, other numbers 2013*

options:A $30,100 B $60,200 C $5,600 D $54,600

Explanation / Answer

All Amounts in $ Free Cash Flow = Operating Cash Flow - Capital Expenditure Operating Cash Flow Net Income 115080 Add : Income Taxes 76720 Add : Interest Expense 18200 Less : Increase in Current Assets -52500 Less : Decrease in Accounts Payable -2800 Lesss : Decrease in Accruals -23100 Operating Cash Flow 131600 Less : Capital Expenditure -42000 Free Cash Flow 89600 This option is not given in the solution. However, since $ 54,600 comes closest to this value, hence that is considered as the correct solution.

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