Nova Electrics anticipates cash flow from operating activities of $11 million in 20X1. It will need to spend $4.5 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $.80 million and preferred stock dividends at $.30 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?