Bartling Energy Systems recently reported $9,250,000 of sales, $5,750,000 of operating costs other than depreciation, and $700,000 of depreciation. The company has $3,200,000 of outstanding bonds that carry a 5% interest rate, and its federal‐plus‐state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to make $1,250,000 of capital expenditures on new fixed assets and to invest $300,000 in net operating working capital. By how much did the firm’s net income exceed its free cash flow?
