ABROWN’S CASH FLOW FROM OPERATIONS (CFO) WAS ($900,000 NET INCOME...

Brown’s cash flow from operations (CFO) was ($900,000 net income plus $300,000 depreciation minus

$400,000 gain =) $800,000. Capital expenditure cash flows were -$1,000,000 for the factory and +

$2,400,000 cash received from sale of the old equipment for a net inflow of cash of $1,400,000. Free cash

flow available to shareholders was ($800,000 + $1,400,000 =) $2,200,000. Note that in the case of the

factory, the $2,000,000 that was financed using a mortgage note would not be part of the statement of cash

flows (SCF), but would be included in the SCF notes.