Lavalle Design Systems Ltd

question 18

Multiple Choice

Lavalle Design Systems Ltd. owns computer equipment that cost $10 million. It expects to use the equipment for 10 years and sell it for $100,000. Lavalle rents everything else. Lavalle generated sales of $10 million in the year just ended and has an operating profit margin of 30%. Lavalle faces a 20% tax rate. During the year working capital was reduced by $4 million and additional equipment worth $3 million was purchased at year end. What was Lavalle's free cash flow for the year assuming straight line depreciation is used?

• A) ($3,610,000)
• B) $990,000
• C) $2,390,000
• D) $3,400,000
• E) $4,390,000

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Definitions:

Vertical Axis

In various contexts, this term can refer to the up-and-down direction in a coordinate system, or metaphorically, to hierarchical levels within organizations.

Line Graph

A type of chart used to display information as a series of data points connected by straight line segments.

Time

The indefinite continued progress of existence and events in the past, present, and future regarded as a whole.

Truncated Scales

Measurement scales with endpoints or ranges that are shortened or reduced in length.