Lunar Inc. has cash flows for operating activities of $500,000. Cash flows used for investments in...
Lunar Inc. has cash flows for operating activities of $500,000. Cash flows used for investments in property, plant, and equipment totaled $80,000, of which 60% of this investment was used to replace machinery to maintain its current operations.
What is free cash flow for Lunar?
A. $300,000
B. $220,000
C. $252,000
D. 452,000
Homework Answers
| Ans. | Option D $452,000 | |||
| *Calculations of payment made for maintaining property, plant and equipment: | ||||
| Cash paid for investment = Property, plant and equipment * Replacement percentage | ||||
| $80,000 * 60% | ||||
| $48,000 | ||||
| *Calculations of Free cash flow: | ||||
| Cash flows from operating activities | $500,000 | |||
| Less: Cash paid for investment | -$48,000 | |||
| Free cash flow | $452,000 | |||
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Lunar Inc. has cash flows for operating activities of $500,000. Cash flows used for investments in...
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section of the statement of cash flows, using the indirect method.
Use the minus sign to indicate cash outflows, cash payments,
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