1. Caustic Chemicals management identified the following cash flows as significa

Question

1. Caustic Chemicals management identified the following cash flows as significant in their year end meeting with analysts: During the year Caustic repaid existing debt of $314,050 and raised additional debt capital of $586,753. It also repurchased stock in the open market for a total of $47,063. What is the net cash provided by financing activities?

2.Hillman Corporation reported current assets of $3,461,750 on December 31, 2011 and current assets of $3,122,220 on December 31, 2010. Current liabilities for the firm were $2,801,890 and $2,756,520 at the end of 2011 and 2010, respectively. Compute the cash flow invested in net working capital at Hillman Corporation during 2011.

3.Fraser Corporation has announced that its net income for the year ended June 30, 2011, was $1,353,412. The company had EBITDA of $4,606,006, and its depreciation and amortization expense was equal to $1,200,714. The company's tax rate is 34 percent. What was its interest expense?

Explanation / Answer

1. net cash provided by financing activities = Additional debt - Repayment of existing debt - stock repurchase

= 586753 - 314050 - 47063

= 225640

2. Working captial = Current assets - Current Liabilities

Working Capital 2010 = 3122220 - 2756520 = 365700

Working Capital 2011 = 3461750 - 2801890 = 659860

Cash flow invested in net working capital = Working Capital 2011 - Working Capital 2010

= 294160 (note that this is a net outflow, that is, net cash flow from investing in working capital = - 294160)

3. EBIT = EBITDA - Depreciation and Amortization = 4606006 - 1200714 = 3405292

Net Income = (EBIT - Interest Expense) * (1 - tax rate)

=> Interest Expense = EBIT - Net Income / (1 - Tax rate) = 3405292 - 1353412/(1 - 0.34) = 1354667.76

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