Question

Question 21 2 pts Red Barchetta Co. paid $27,500 in dividends and $28,311 in interest over the past year. During the year, net working capital increased from $13,506 to $18,219. The company purchased $42,000 in fixed assets and had a depreciation expense of $16,805. During the year, the company issued $25,000 in new equity and paid off $21,000 in long-term debt. What was the company's cash flow from assets? $52,208 $45,719 $50.832 $53,159 $51,811

Answer 1

Solution:
	Answer is 5th option $51,811
Working Notes:
Notes:	Cash flow from assets is the total net cash flow which can be with the given two formulas , as no operating cash flows have been given in the question we have to use 2nd formula.
	Cash flow from assets = Operating cash flow - Change in NWC - Net capital spending
	Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
So	Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
first we get	Cash flow to creditors   = paid off of Long term debt + Interest paid
	Cash flow to creditors   = $21,000 + $28,311
	Cash flow to creditors   = $49,311
then	Cash flow to Stockholders = Dividends paid- Issued new Equity
	Cash flow to Stockholders =$27,500 - 25,000
	Cash flow to Stockholders =$2,500
Hence at last
	Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
	Cash flow from assets = $49,311 + $2,500
	Cash flow from assets = $51,811
Please feel free to ask if anything about above solution in comment section of the question.