Ref 11-2 Champagne, Inc., Had Revenues of $12 Million, Cash Operating Expenses

question 22

Multiple Choice

Ref 11-2
Champagne, Inc., had revenues of $12 million, cash operating expenses of $8 million, and depreciation and amortization of $1.5 million during 2008. The firm purchased $700,000 of equipment during the year while increasing its inventory by $500,000 (with no corresponding increase in current liabilities) . The marginal tax rate for Champagne is 30 percent.
-Free cash flow: What is Champagne's NOPAT for 2008?

• A) $1,750,000
• B) $2,500,000
• C) $3,250,000
• D) $4,000,000

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Definitions:

Income Statement

A document detailing a firm's income and outgoings during a certain time, ending in either a profit or a deficit.

Net Income

The total profit of a company after subtracting all costs, expenses, and taxes from the total revenue.

Net Loss

The amount by which total expenses exceed total revenues in a specific period, indicating a company's financial performance was negative.

Owner Withdrawal

The process by which an owner takes funds or assets out of the business for personal use, often referred to as "draws."