3. Keyser Materials paid $7,500 in dividends and $28,311 in interest over the past year while net working capital increased from $13,506 to $18,219. The company purchased $42,000 in net new fixed assets and had depreciation expenses of $16,805. During the year, the firm issued $25,000 in net new equity and paid off $11,000 in long-term debt. What is the amount of the cash flow from assets?
The cash flow from assets can be calculated using the following formula:
Cash flow from assets = Operating cash flow - Net capital spending - Change in net working capital
Operating cash flow = Net income + Depreciation expenses + Interest expense
Net capital spending = Net new fixed assets - Depreciation expenses
Change in net working capital = Final net working capital - Initial net working capital
First, let's calculate the operating cash flow:
Operating cash flow = Net income + Depreciation expenses + Interest expense
Operating cash flow = $0 (since net income is not given) + $16,805 + $28,311
Operating cash flow = $45,116
Next, let's calculate the net capital spending:
Net capital spending = Net new fixed assets - Depreciation expenses
Net capital spending = $42,000 - $16,805
Net capital spending = $25,195
Finally, let's calculate the change in net working capital:
Change in net working capital = Final net working capital - Initial net working capital
Change in net working capital = $18,219 - $13,506
Change in net working capital = $4,713
Now, we can calculate the cash flow from assets:
Cash flow from assets = Operating cash flow - Net capital spending - Change in net working capital
Cash flow from assets = $45,116 - $25,195 - $4,713
Cash flow from assets = $15,208
Therefore, the amount of cash flow from assets is $15,208.