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Question: Johnson Manufacturing recently reported $7,250,000 of sales, $1,875,000 of operating costs other than depreciation, and $1,150,000 of depreciation. The company had $200,000 of outstanding bonds that carry a 6.00% interest rate, and its federal-plus-state income tax rate was 30%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to spend $350,000 to buy new fixed assets and to invest $150,000 in net operating working capital. What was the firm's free cash flow?

Question: Johnson Manufacturing recently reported $7,250,000 of sales, $1,875,000 of operating costs other than depreciation, and $1,150,000 of depreciation. The company had $200,000 of outstanding bonds that carry a 6.00% interest rate, and its federal-plus-state income tax rate was 30%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to spend $350,000 to buy new fixed assets and to invest $150,000 in net operating working capital. What was the firm's free cash flow?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question: Johnson Manufacturing recently reported $7,250,000 of sales, $1,875,000 of operating costs other than depreciation, and $1,150,000 of depreciation. The company had $200,000 of outstanding bonds that carry a 6.00% interest rate, and its federal-plus-state income tax rate was 30%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to spend $350,000 to buy new fixed assets and to invest $150,000 in net operating working capital. What was the firm's free cash flow?
Transcribed Image Text:Question: Johnson Manufacturing recently reported $7,250,000 of sales, $1,875,000 of operating costs other than depreciation, and $1,150,000 of depreciation. The company had $200,000 of outstanding bonds that carry a 6.00% interest rate, and its federal-plus-state income tax rate was 30%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to spend $350,000 to buy new fixed assets and to invest $150,000 in net operating working capital. What was the firm's free cash flow?
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