Nova Electrics anticipated cash flow from operating activities of $8 million in 2011. It will need to spend $5.5 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at $0.6 million and preferred stock dividends at $0.4 million.
a. What is the firm’s projected free cash flow for the year 2011?
b. What does the concept of free cash flow represent?