8.
Nova Electrics anticipates cash flow from operating activities of $13 million in 20X1. It will need to spend $8.5 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $.40 million and preferred stock dividends at $.35 million.
a. What is the firm’s projected free cash flow for the year 20X1? (Enter your answer in millions of dollars rounded to 2 decimal places.)
b. What does the concept of free cash flow represent?
Free cash flow represents the funds that are available for special financing activities, such as a leveraged buyout.
Free cash flow represents the funds that are available for investing activities, such as purchasing plant and equipment assets.
Free cash flow equals cash flow from operating activities.