Answer:
The correct option is <u>A. $134,000</u>.
Explanation:
Note: This question is not complete as all the data are omitted. The complete question is therefore provided before answering the question as follows:
Outdoor Lighting Supply expects the following for 2018:
Net cash provided by operating activities of $284,000
Net cash provided by financing activities of $67,000
Net cash provided by investing activities of $76,000
Cash dividends paid to stockholders of $29,000
Outdoor expects to spend $150,000 to modernize its showroom.
How much free cash flow does Outdoor expect for 2018?
Select one:
A. $134,000
B. $112,000
C. $264,000
D. $105,000
The explanation to the answer is now provided as follows:
Free cash flow (FCF) refers to the cash that is generated by a company through its operations minus capital expenditure such as cost of acquiring new assets as well as maintenance Capital expenditure and capital work in progress.
Therefore, free cash flow can be calculated using the following formula:
FCF = NCO - Capital expenditure ..................................... (1)
Where, for Outdoor Lighting Supply;
FCF = Free cash flow = ?
NCO = Net cash provided by operating activities = $284,000
Capital expenditure = Amount expected to spend to modernize showroom = $150,000
Substituting the values into equation (1), we have:
FCF = $284,000 - $150,000
FCF = 134,000
The amount of free cash flow Outdoor expects for 2018 is $134,000. Therefore, the correct option is <u>A. $134,000</u>.
