In 2012, net cash provided by operations for ABC Company was$106,484. The company spent $702 on...
In 2012, net cash provided by operations for ABC Company was$106,484. The company spent $702 on property and plant. It also acquired another company costing $31,536.Additionally, the company paidits debt of $25,000, and dividend of $29,377. The company made an interest payment of $344. The tax rate is 35%.(a) Calculate the amount of free cash flows for all debt and equity shareholders for ABC Company for year 2012.(b) Calculate the amount of free cash flows for common equity shareholders for ABC Company for year 2012.
Homework Answers
Solution:
Free cash flow for debt and equity = operating cash flow + interest expense *(1- tax rate) - net capital spending
Free cash flow for debt and equity = $1,06,484 + 344*(1-0.35) - (31,536 + 704)= $74,467.60
Free cash flow for equity share holders= free cash flow for debt and equity - interest *(1- tax rate ) - repayment of borrowing
Free cash flow for equity share holders = $74,467.60 - $344*(1-0.35) - $25,000= $49,244
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