You Have Gathered This Information on a Firm: $500,000 Sales

question 85

Multiple Choice

You have gathered this information on a firm: $500,000 sales, $10,000 cash dividends, $300,000 cost of goods sold, $20,000 administrative expense, $20,000 depreciation expense, $40,000 interest expense, $10,000 purchase of productive equipment, no changes in working capital, and a tax rate of 35%.What is the free cash flow?

• A)$141,000
• B)$168,000
• C)$78,000
• D)$142,000

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Definitions:

MIRR

Modified Internal Rate of Return, a financial measure used to assess the attractiveness of investments by accounting for the cost of borrowing and reinvestment rates.

Cash Flows

The aggregate sum of money entering and exiting a business, notably affecting its cash flow.

WACC

Weighted Average Cost of Capital is an evaluation method for determining the cost of a company's capital, with each source of capital weighted based on its relative proportion.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows, given a specified rate of return.