Johnson battery systems recently reported $9,000 of sales, $6,000 of operating costs other than depreciation, and $1,500 of depreciation. the company had no amortization charges, it had $4,000 of bonds that carry a 7% interest rate, and its federal-plus-state income tax rate was 40%. in order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to make $800 of capital expenditures on new fixed assets and to invest $500 in net operating working capital. what was its free cash flow?

$1,100

Explanation:

EBIT = Sales - Costs - Depreciation

       = $9,000 - $6,000 - $1,500

       = $1,500

Net income = EBIT - Tax @ 40%

                    = $1,500 - $600

                    = $900

Operating cash flow = Net income + Depreciation

                                  = $900 + $1,500

                                  = $2,400

Free cash flows:

= Operating cash flow - Increase in working capital - Capital expenditure

= $2,400 - $500 - $800

= $1,100

answer; intensive use of a sales force and is relatively costly;

the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20