1. You have gathered this information on a firm $500,000 sales, $10,000 cash dividends, $300,000 cost of goods sold, $20,000 administrative expense, $20,000 depreciation expense, $40,000 interest expense, $10,000 purchase of productive equipment, no changes in working capital, and tax rate of 35%. What is the free cash flow?
a. $141,000
b. $168,000
c. $128,000
d. $142,000
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2. Suppose you sell a fixed asset for $121,000 when it's book value is $147,000. If your company's marginal tax rate is 35%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
A. $147,000
B. $26,000
C. $16,900
D $130,100