Question: Nova Electrics anticipates cash flow from operating activities of $14 million in 20X1. It will need to spend $9.5 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $2.10 million and preferred stock dividends at $1.35 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 equals cash flow from operating activities.
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.