Question

Question: Kalapono Company expects the following for 2018:

• Net cash provided by operating activities of \(100,000.

• Net cash provided by financing activities of \)10,000.

• Net cash used for investing activities of \(20,000 (no sales of long-term assets).

• Cash dividends paid to stockholders was \)2,000.

How much free cash flow does Kalapono expect for 2018?

Short answer

Answer

Free cash flow expected by Kalapono is $78,000.

Step-by-step solution

Cash flow from operating activities 

The planned investment in long-term assets is deducted from the net cash provided by operating activities. Here, net cash used for investing activities will be deducted from the cash provided by operating activities.

Calculation of free cash flow Kalapono expect for 2018

Particulars		Amount($)
Net cash provided by operating activities	100,000
Cash payments planned for investments in long-term assets	(20,000)
Cash dividends	(2,000)
Free cash flow		78,000