HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
7th Edition
ISBN: 9780136505273
Author: MILLER-NOBLES
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 8QC
To determine
Free cash flow is defined as an evaluation of financial performance of a company. It describes the net cash provided from operating activities after making required adjustments for dividends and capital expenditures. In other words, it is the cash flow arrived after making payment for capital expenditures and dividend payments.
The following formula is used to calculate free cash flow.
To Compute: Free cash flow of H Incorporation.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A company is considering a $240,000 investment in machinery with the following net cash flows. The
company requires a 9% return on its investments.
Initial investment
Required rate of return
Required:
$240,000
9%
(a) Compute the net present value of this investment.
Present Value of Net
Period
1
Net Cash Flows
Cash Flows
$53,000
$48,624
20
49,000
41,242
3
136,000
105,017
4
78,000
55,257
5
61,000
39,646
Totals
$377,000
$289,786
(240,000)
$49,786
Initial investment
Net present value
Verify the value of cell C18 using the NPV function
(b) Should the machinery be purchased?
Yes
JoyFM Inc. has an investment opportunity, which generates cash flows shown below.
The investment opportunity gives an IRR of
Year Cash Flow
0
- $14,500
1
2
3
4
7,400
8,700
2,500
2,100
21.63%
22.49%
23.07%
20.76%
24.22%
Morrisey Company has two investment opportunities. Both investments cost $6,900 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below:
Investment I
Investment II
Period 1
$ 1,950
$ 1,950
Period 2
1,950
3,140
Period 3
2,950
4,330
Period 4
5,520
2,950
Total
$12,370
$12,370
What is the net present value of Investment Il assuming an 12% minimum rate of return? (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round your intermediate calculations. Round your answer to the nearest
whole dollar.)
Multiple Choice
$2,301
$9,201
$12,370
$(8,903)
Chapter 14 Solutions
HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
Ch. 14 - The purposes of the statement of cash flows are to...Ch. 14 - The main categories of cash flow activities are a....Ch. 14 - Operating activities are most closely related to...Ch. 14 - Which item does not appear on a statement of cash...Ch. 14 - Leather Shop earned net income of 57,000 after...Ch. 14 - The Plant Assets account and Accumulated...Ch. 14 - Mountain Water Corp. issued common stock of 28,000...Ch. 14 - Prob. 8QCCh. 14 - Prob. 9AQCCh. 14 - If accrued liabilities increased during the year,...
Ch. 14 - Prob. 1RQCh. 14 - How does the statement of cash flows help users of...Ch. 14 - Describe the three basic types of cash flow...Ch. 14 - What types of transactions are reported in the...Ch. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Explain why depreciation expense, depletion...Ch. 14 - Prob. 8RQCh. 14 - If current assets other than cash increase, what...Ch. 14 - If current liabilities increase, what is the...Ch. 14 - Prob. 11RQCh. 14 - Prob. 12RQCh. 14 - Prob. 13RQCh. 14 - Prob. 14RQCh. 14 - Prob. 15ARQCh. 14 - Prob. 16BRQCh. 14 - Describing the purposes of the statement of cash...Ch. 14 - Prob. 14.2SECh. 14 - Classifying items on the indirect statement of...Ch. 14 - Classifying cash flow items Consider the following...Ch. 14 - Prob. 14.17ECh. 14 - Prob. 14.18E
Knowledge Booster
Similar questions
- A machine with a cost of $143,000 and accumulated depreciation of $98,000 is sold for $56,500 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: Multiple Choice $11,500. $45,000. Zero. This is a financing activity.arrow_forwardA machine with a cost of $146,000, accumulated depreciation of $93,000, and current year depreciation expense of $21,000 is sold for $46,400 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: Multiple Choice $46,600. $6,600. $21,000.arrow_forwardSave A Cash flows from operating activities are $3,600,000; cash flows from financing activities are $2,700,000; capital expenditures are $1,620,000; and dividends are $360,000. How much is free cash flow? a. S3,240,000 b. $1,980,000 c. S1.620,000 d. S720,000 e. None the above.arrow_forward
- Optimal Cash Transfer Barenbaum Industries projects that cash outlays of 4.5 million will occur uniformly throughout the year. Barenbaum plans to meet its cash requirements by periodically selling marketable securities from its portfolio. The firms marketable securities are invested to earn 12%, and the cost per transaction of converting securities to cash is 27. a. Use the Baumol model to determine the optimal transaction size for transfers from marketable securities to cash. b. What will be Barenbaums average cash balance? c. How many transfers per year will be required? d. What will be Barenbaums total annual cost of maintaining cash balances? What would the total cost be if the company maintained an average cash balance of 50,000 or of 0 (it deposits funds daily to meet cash requirements)?arrow_forwardWhat is the Internal Rate of Return for the following net annual cash flows? Cash flows -$45,000 $12,000 $37,000 $12,000 $17,000 A. 26.72% B. 16.72% C. 6.72% D. 36.72% Period Today Year 1 Year 2 Year 3 Year 4arrow_forwardBeyer Company is considering buying an asset for $230,000. It is expected to produce the following net cash flows. Year 1 Year 3 Year 4 Year 5 $53,000 $64,000 $150,000 $26,000 Net cash flows Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.) Year Initial investment Year 1 Year 2 Year 3 Year 4 Year 5 Total Net Cash Flows $ (230,000) Year 2 $35,000 Payback period Cumulative Cash Flowsarrow_forward
- Balance of Cash after AJE (in unit dollars, two decimal places, use standard accounting rounding): After completing Part C of the term project you have the following: Revenue 100,000.00 15,000.00 45,000.00 CGS Costs Depreciation 15,000 Salaries 30,000 Net Income Assets Cash 40,000.00 110,000.00 20,000.00 Equipment 100,000.00 AD Equipment (10,000.00) Answer: Liabilities 70,000.00 Salaries Payable 70,000.00 Net Income 40,000.00 Total Liabilities + OE 110,000.00arrow_forwardAG company would like to spend RM 700,000 on buying equipment. The cash inflows as in the Table. Calculate the payback period. Payback Period YEAR CASH FLOW 1 150.000 2 150,000 3 200,000 4 600,000 5 900,000arrow_forwardYou are offered the opportunity to invest $95 000 in a business which will yield annual net cash inflows of $18 000 for a period of 8 years. What is the net present value of your investment? a. $86 603 b. $1029 c. $49 000 d. $46 000arrow_forward
- The Zinger Corporation is considering an investment that has the following data: Year 1 Year 2 Year 3 Year 4 Year 5 $8,000 $3,000 Investment Cash inflow $2,000 $2,000 $5,000 $4,000 $4,000 Cash inflows occur evenly throughout the year. The payback period for this investment is: A. 3.0 B. 4.0 C. 3.5 D. 4.5arrow_forwardBeyer Company is considering buying an asset for $270,000. It is expected to produce the following net cash flows. Year Year 1 $66,000 Initial investment Year 1 Year 2 Year 3 Year 4 Year 5 Total Net Cash Flows Net cash flows Compute the payback period for this Investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Perlod answer to 2 decimal places.) $ (270,000) Year 2 $39,000 Payback period = Year 3 $67,000 Cumulative Cash Flows Year 4 $200,000 Year 5 $22,000arrow_forwardThe following table indicates the net cash flows of a capital asset: Year Net Cash Flow 0 $-159,000 1 $59,000 2 $59,000 3 $59,000 4 $59,000 Do not enter dollar signs or commas in the input boxes. Round your answer to 2 decimal places. Calculate the cash payback period using the formula method. Payback: Answer yearsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning