Reference no: EM132509431
Free Cash Flows
Rhodes Corporation's financial statements are shown below.
Rhodes Corporation: Income Statements for Year Ending December 31
(Millions of Dollars)
2020 2019
Sales $ 12,000 $ 10,000
Operating costs excluding depreciation 10,606 8,746
Depreciation and amortization 370 330
Earnings before interest and taxes $ 1,024 $ 924
Less interest 140 100
Pre-tax income $ 884 $ 824
Taxes (25%) 221 206
Net income available to common stockholders $ 663 $ 618
Common dividends $ 202 $ 200
Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
2020 2019
Assets
Cash $ 450 $ 400
Short-term investments 120 100
Accounts receivable 2,750 2,500
Inventories 1,750 1,700
Total current assets $ 5,070 $ 4,700
Net plant and equipment 3,750 3,500
Total assets $ 8,820 $ 8,200
Liabilities and Equity
Accounts payable $ 900 $ 800
Accruals 450 400
Notes payable 176 100
Total current liabilities $ 1,526 $ 1,300
Long-term debt 900 800
Total liabilities $ 2,426 2,100
Common stock 5,133 5,300
Retained earnings 1,261 800
Total common equity $ 6,394 $ 6,100
Total liabilities and equity $ 8,820 $ 8,200
- Suppose the federal-plus-state tax corporate tax is 25%.
Answer the following questions.
Question 1: What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.
Question 2: What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
Question 3: What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
Question 4: What is the free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to the nearest whole number.
Question 5: What is the ROIC for 2020? Round your answer to two decimal places.
Question 6: How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
After-tax interest payment $ million
Reduction (increase) in debt $ million
Payment of dividends $ million
Repurchase (Issue) stock $ million
Purchase (Sale) of short-term investments $ million