Given Are the Following Data for Year 1

question 70

Multiple Choice

Given are the following data for year 1:
Profit after taxes = $5 million; Depreciation = $2 million; Investment in fixed assets = $4 million; Investment net working capital = $1 million. Calculate the free cash flow (FCF) for year 1.

• A)$7 million
• B)$3 million
• C)$11 million
• D)$2 million

---

Definitions:

Equity Capital

The amount of money that is invested in a company by its owners, in exchange for ownership interest or shares.

Economic Profit

The surplus remaining after deducting total costs from total revenues, including both explicit and implicit costs, and representing a measure of economic efficiency.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.

Accounting Profit

The total revenue of a business minus the explicit costs, representing the financial gain on its income statement.