Champagne, Inc., had revenues of $12 million, cash operating expenses of $8 million, and depreciation and amortization of $1.5 million during 2008. The firm purchased $700,000 of equipment during the year while increasing its inventory by $500,000 (with no corresponding increase in current liabilities). The marginal tax rate for Champagne is 30 percent.
Free cash flow: What are Champagne's cash flows associated with investments for 2008?
A. 700,000
B. 1,200,000
C. None of these
D. 500,000