Boulder Company had net cash flows of $150,000 from operating activities.It extended $60,000 for purchases of plant assets,sold plant assets for $5,000,and paid dividends of $70,000.The company's free cash flow is
A)$25,000.
B)$50,000.
C)$60,000.
D)$75,000.

Question

Quizplus · Accepted Answer

Free cash flow is calculated as net cash flows from operating activities minus capital expenditures. Here, it's $150,000 (operating activities) - $60,000 (purchase of plant assets) = $90,000. Then, adding the $5,000 from the sale of plant assets gives $95,000. However, paying dividends is not considered in calculating free cash flow, so the final calculation remains $95,000 - $70,000 (an incorrect subtraction not relevant to free cash flow calculation) does not apply. The correct calculation should simply be $150,000 - $60,000 = $90,000, indicating an error in the provided choices and explanation. Given the options, none directly match the correct calculation of free cash flow based on the standard definition. The closest option based on the initial incorrect explanation was A) $25,000, but this was based on a misunderstanding of how free cash flow is calculated. The correct free cash flow, without considering dividends (since they're not part of its calculation), would indeed be $90,000, which is not an option provided.

Boulder Company Had Net Cash Flows of $150,000 from Operating