Chapter_10web - 1,447 Interest received 617 (a) From this...

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EXERCISES FOR CHAPTER 10 With Solutions International Business Machines (IBM) Below is a summary of part of IBM’s Statement of Cash Flows for the year ended December 31, 2001 (in millions of dollars). The firm faces a 37% statutory tax rate. Net cash provided from operating activities 9,274 Cash flow from investing activities: Payments for plant, rental machines and other property (5,616) Proceeds from disposition of plant, rental machines and other property 1,619 Investment in software (565) Purchases of marketable securities (1,079) Proceeds from marketable securities 1,393 Net cash used in investing activities (4,248) Supplemental data: Cash paid during the year for: Income taxes 2,697 Interest paid
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Unformatted text preview: 1,447 Interest received 617 (a) From this information, calculate free cash flow for 2001. (b) What was the net amount of cash paid out of the firm in financing activities during 2001? IBM: Solution (a) Cash flow from operations reported 9,274 Net interest (1,447 617) 830 Tax (at 37%) 307 523 9,797 Investment minus securities transactions (4,248 + 314) 4,562 Free cash flow 5,235 (Net securities transactions = 1,393 1,079 = 314: these are transactions in financials assets, not operating assets.) (b) The same: 5,235 [C I = d + F]------------------------------------------------------------------------------------------------------------...
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Chapter_10web - 1,447 Interest received 617 (a) From this...

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