A. The focus on traditional financial statements is -Select data rather than cash flow. However, cash flow is important to investors, managers, and stock analysts. Therefore, corporate decision makers and security analysts need to modify accounting data provided to them. An important modification is the concept of free cash flow (FCF). Many analysts regard FCF as being the single and most important number that can be developed from the accounting statements, even more important than net income. The equation for free cash flow is: FCF = (EBIT(1 - T) + Depreciation and amortization] - Capital expenditures + ANet operating working capital] -Select cash flow is the cash flow actually available for payments to all investors (stockholders and debtholders) after the company has made investments in fixed assets, new products, and -Select- A negative FCF means that the company does not have sufficient -Select- funds to finance its investment in fixed assets and working capital, and that it will have to raise new money in the -Select markets to pay for these investments. Negative FCF is not always bad. If FCF is negative because after-tax operating income is negative this is bad, because the company is probably experiencing operating problems. Exceptions to this might be startup companies, companies incurring significant expenses to launch a new product line, and high-growth companies with large capital investments. Quantitative Problem: Rosnan Industries' 2018 and 2017 balance sheets and income statements are shown below. Balance Sheets Assets 2018 2017 Cash and equivalents $100 $85 Accounts receivable 275 300 Inventories 375 250 Total current assets $750 5635 Net plant and equipment 2,300 1,490 Total assets $3,050 $2,125 Liabilities and Equity $150 $85 Accruals 75 50 Notes payable 150 75 Total current liabilities $375 $210 Long-term debt 450 290 Total liabilities 825 500 Common stock 1.225 1,225 Retained earnings 1,000 400 Common equity 2,225 1,625 Total liabilities and equity $3,050 $2,125 Income Statements 2018 $2,500 2017 $1,700 $ 1,000 1,250 $700 75 Sales Operating costs excluding depreciation and amortization EBITDA Depreciation and amortization EBIT Interest EBT Taxes (40%) Net income $1,250 100 $1,150 62 5625 45 $1,088 435 $653 $580 232 $348 Dividends paid Addition to retained earnings $53 $600 $48 $300 Shares outstanding Price WACC 100 $25.00 10.00% 100 $22.50 The balance in the firm's cash and equivalents account is needed for operations and is not considered "excess" cash. Using the financial statements given above, what is Rosnan's 2018 free cash flow (FCF)? Use a minus sign to indicate a negative FCF. Round your answer to the nearest dollar. S S