Q: The 2014 and 2013 balance sheets for Kuhl Industries are provided below. The
ID: 2636732 • Letter: Q
Question
Q:
The 2014 and 2013 balance sheets for Kuhl Industries are provided below. The company’s sales for 2014 were $680 million, and EBITDA was 20% of sales. Furthermore, depreciation amounted to 10% of net fixed assets, interest expense was $17.15 million, the corporate tax rate was 40%, and Kuhl pays out 70% of its net income as dividends.
Kuhl had 5 million shares outstanding in 2014, the 12/31/14 stock price was $60 per share, and its after-tax cost of capital was 13%. Based upon this information, answer the following seven questions. (3 points each)
Kuhl Industries December 31 Balance Sheets
(in thousands of dollars)
2014
2013
Assets
Cash and cash equivalents
$25,250
$20,176
Excess cash
$2,800
$3,240
Accounts receivable
$57,950
$45,890
Inventories
$80,830
$75,110
Total current assets
$166,830
$144,416
Net fixed assets
$283,000
$250,000
Total assets
$449,830
$394,416
Liabilities and equity
Accounts payable
$18,905
$16,118
Accruals
$11,175
$8,772
Notes payable
$33,500
$30,200
Total current liabilities
$63,580
$55,090
Long-term debt
$125,750
$105,125
Total liabilities
$189,330
$160,215
Common stock
$160,000
$150,000
Retained Earnings
$100,500
$84,201
Total common equity
$260,500
$234,201
Total liabilities and equity
$449,830
$394,416
What was the company’s 2014 net income?
How much cash was provided by operating activities in 2014?
What was the company’s 2014 net operating working capital (NOWC)? Assume that excess cash is not needed in the firm’s regular operations but rather is used for acquisitions.
What was the company’s 2014 free cash flow?
What were the company’s 2014 MVA and EVA?
What was the company’s 2014 days’ sales outstanding (DSO)? Use a 365-day year in your calculation
Set up the company’s 2014 Statement of Stockholders’ Equity.
Kuhl Industries December 31 Balance Sheets
(in thousands of dollars)
2014
2013
Assets
Cash and cash equivalents
$25,250
$20,176
Excess cash
$2,800
$3,240
Accounts receivable
$57,950
$45,890
Inventories
$80,830
$75,110
Total current assets
$166,830
$144,416
Net fixed assets
$283,000
$250,000
Total assets
$449,830
$394,416
Liabilities and equity
Accounts payable
$18,905
$16,118
Accruals
$11,175
$8,772
Notes payable
$33,500
$30,200
Total current liabilities
$63,580
$55,090
Long-term debt
$125,750
$105,125
Total liabilities
$189,330
$160,215
Common stock
$160,000
$150,000
Retained Earnings
$100,500
$84,201
Total common equity
$260,500
$234,201
Total liabilities and equity
$449,830
$394,416
Explanation / Answer
Calculation of Net Income:
Cash from Operating Activity;
3. Net Operating Working Capital = Current Operating Assets - Current Non Interest Liabilities
NOWC = 164,030,000 - 30,080,000 = $133,950,000
4. Free Cash Flow = Cash from Operating Activities - Capital Expenditure
Free Cash Flow = 68,266,000 - 58,000,000 = $10,266,000
(Capital expenditure of 58,000,000 in purchase of Fixed Assets)
5. Calculation of MVA = Market Value of Capital Contributed - Capital Invested
Market Value of Equity= 5,000,000 x 60 =$300,000,000
MVA =300,000,000 - 260,500,000 = $39,500,000
EVA = Net Operating profit after taxes - (Capital x Cost of Capital)
Capital Invested = 260,500,000 x 13% = 33,865,000
EVA = 54,330,000 - 33,865,000 = $20,465,000
EVA = $20,465,000
7. Calculation of DSO:
DSO = Accounts Receivables / Net Sales Per Day
DSO = 57,950,000 / 1,863,014
DSO = 31.10 Days
8. Statement of Stockholders Equity:
Amount($) Sales 680,000,000 -Cost of Goods Sold(80%) 544,000,000 Net Operating Income 136,000,000 Less: Depreciation 28,300,000 Less: Interest 17,150,000 EBT 90,550,000 - Taxes(40%) 36,220,000 Net Income 54,330,000Related Questions
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