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:

Last Month

A reference to the immediate month preceding the current one.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard variable overhead expected, based on the actual activity level.

Variable Overhead

Indirect, fluctuating costs that change with the level of production or organizational activity.

Direct Labor-hours

The aggregate amount of time spent by staff directly participating in the production process or in service provision.