Asked by Miriam Petit on Jul 01, 2024

Wells Water Systems recently reported $8,250 of sales,$4,500 of operating costs other than depreciation,and $950 of depreciation.The company had no amortization charges,it had $3,250 of outstanding bonds that carry a 6.75% interest rate,and its combined federal and provincial income tax rate was 35%.In order to sustain its operations and thus generate sales and cash flows in the future,the firm was required to spend $750 to buy new fixed assets and to invest $250 in net operating working capital.How much free cash flow did Wells generate?

A) $1,770.00
B) $1,858.50
C) $1,951.43
D) $2,049.00

Free Cash Flow

The sum of money a business produces once it subtracts the cash spent to sustain its operations and upkeep of its capital assets.

Operating Costs

Expenses associated with running a business's core operations on a daily basis, excluding the cost of goods sold.

Net Operating Working Capital

Net operating working capital is a financial measure that represents the difference between operating current assets and operating current liabilities.

  • Analyze the impact of dividends on taxable income and identify effective uses of free cash flow.