Given Are the Following Data for Year 1

question 57

Multiple Choice

Given are the following data for year 1:
Profits after taxes = $14 million; Depreciation = $6 million; Interest expense = $6 million; Investment in fixed assets = $12 million; Investment in working capital = $3 million. The corporate tax rate is 25 percent. Calculate the free cash flow (FCF) for year 1.

• A)$4 million
• B)$9.5 million
• C)$6 million
• D)$7 million

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Definitions:

Price Elasticity

The measure of demand fluctuation as a response to changing prices of a good.

Agricultural Products

Products stemming from the practice of agriculture, such as crops and animal products, which can be used for food, fuel, and raw materials.

Spending

The act of using money to purchase goods or services, contributing to economic activity.

Food Purchases

Transactions involved in acquiring food products for consumption, influenced by prices, income, preferences, and availability.