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Free Cash Flow
The following is an extract from a firms latest statement of cash flows (in $ millions):
| Cash flows from operating activities | |
| Net income | 2.1 |
| Accruals in net income | 0.9 |
| Interest and other costs of financing paid | -1.2 |
| Net cash flow from operations | 1.8 |
| | |
| Cash flows from investing activities | |
| Purchase of short-term investments | -0.2 |
| Purchase of property, plant and equipment | -3.0 |
| Proceeds from sale of property, plant and equipment | 0.5 |
| Net cash flow from investing activities | -2.7 |
Assuming a corporate tax rate of 30%, the firms free cash flow is:
Select one:
a.
$5.14 million
b.
$0.90 million
c.
$0.14 million
d.
$4.50 million
Answer & Explanation
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