Shrives Publishing recently reported $11,500 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. During the year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,550. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. What was its free cash flow? a. $4,450.00 b. $2,012.50 c. $3,262.50 d. $4,812.50 e. $6,362.50

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Shrives Publishing recently reported $11,500 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had
$3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. During the year, the firm had expenditures on fixed
assets and net operating working capital that totaled $1,550. These expenditures were necessary for it to sustain operations and generate future sales and
cash flows. What was its free cash flow?
a. $4,450.00
b. $2,012.50
c. $3,262.50
d. $4,812.50
e. $6,362.50
Transcribed Image Text:Shrives Publishing recently reported $11,500 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. During the year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,550. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. What was its free cash flow? a. $4,450.00 b. $2,012.50 c. $3,262.50 d. $4,812.50 e. $6,362.50
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