A Further Examination of Noncash Charges.
Consider the following cash flow statement of Dell Computer (Nasdaq NMS:DELL) in order to forecast Dell’s future cash flows. The special charges relate to restructuring charges and purchased research and development expenses.
|
Years Ending |
29 Jan 1999 |
28 Jan 2000 |
2 Feb 2001 |
|
Cash flows from operating activities: |
|||
|
Net income |
$1,460 |
$1,666 |
$2,177 |
|
Adjustments to reconcile net income to |
|||
|
net cash provided by operating activities: |
|||
|
Depreciation and amortization |
103 |
156 |
240 |
|
Tax benefits of employee stock plans |
444 |
1,040 |
929 |
|
Special charges |
194 |
105 |
|
|
Gain on sale of investments |
(9) |
(80) |
(307) |
|
Other |
20 |
56 |
109 |
|
Changes in: |
|||
|
Operating working capital |
367 |
812 |
671 |
|
Non current assets and liabilities |
51 |
82 |
271 |
|
Net cash provided by operating activities |
$2,436 |
$3,926 |
$4,195 |
How would you use the tax benefits of employee stock option plans, special charges, and the gain on sale of investments as noncash charges when using the add back method to calculate free cash flows starting from net income?