Alpha Computers Reports Net Income of $44 Million

question 5

Essay

Alpha Computers reports net income of $44 million. Included in that number are depreciation expense of $7 million and a loss on the sale of land of $2 million. Records reveal decreases in Accounts Receivable, Inventory, and Accounts Payable of $4 million, $3 million, and $2 million, respectively. Calculate Alpha Computers' net cash flows from operating activities.

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Definitions:

MCC Schedule

Marginal cost of capital schedule. A plot of the WACC (weighted average cost of capital) against the total amount of capital to be raised in a planning period. The MCC rises as more capital is raised and the costs of individual components experience step function increases.

Capital Spending

Refers to funds spent by a business or government on acquiring or maintaining physical assets such as property, plants, and equipment.

MCC

Marginal Cost of Capital; the cost of obtaining an additional dollar of new capital.

Marginal Cost of Capital

The cost of obtaining one additional dollar of new capital, which reflects the cost of the last unit of capital raised.