FIN 486 Expect Success/uophelp.com FIN 486 Expect Success/uophelp.com | Page 18

ended December 31, 2015, using Equation 4.1.
b. Calculate the firm’s operating cash flow (OCF) for the year ended
December 31, 2015, using Equation 4.3. c. Calculate the firm’s free
cash flow (FCF) for the year ended December
31, 2015, using Equation 4.4.
d. Interpret, compare, and contrast your cash flow estimates in parts b
and c.

P4–19
Integrative: Pro forma statements Red Queen Restaurants wishes
to prepare financial plans. Use the financial statements and the other
information provided below to prepare the financial plans.
The following financial data are also available: (1) The firm has
estimated that its sales for 2016 will be $900,000. (2) The firm
expects to pay $35,000 in cash dividends in 2016. (3) The firm wishes
to maintain a minimum cash balance of $30,000. (4) Accounts
receivable represent approximately 18% of annual sales. (5) The
firm’s ending inventory will change directly with changes in
sales in 2016. (6) A new machine costing $42,000 will be purchased
in 2016. Total
depreciation for 2016 will be $17,000. (7) Accounts payable will
change directly in response to changes in
sales in 2016. (8) Taxes payable will equal one-fourth of the tax
liability on the pro