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McMahon Inc. reported the following on the company's statement of cash flows in Year 2 and Year 1: Year 2 Year 1 Net cash flow from operating activities $294,000 $280,000 Net cash flow used for investing activities (224,000) (252,000) Net cash flow used for financing activities (63,000) (42,000) Seventy percent of the net cash flow used for investing activities was used to replace existing capacity. a. Determine McMahon's free cash flow for both years. Year 2 $ Year 1 $

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TomShelby

Answer:

Total cash generated for Year 1              7,000

Total cash used for Year 2                   (14,000)

Explanation:

We will subtract the investing and financing from the investing activities to calculate the cash flow for the year.

generated from operating activities   294,000

used for investing activities                (224,000)

used for financing activities                 (63,000)  

Total cash generated for Year 1              7,000

generated from operating activities   280,000

used for investing activities                (252,000)

used for financing activities                 (42,000)  

Total cash used for Year 2                   (14,000)

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