Looking for a step by step answer to this question I\'ve been struggling with an

Question

Looking for a step by step answer to this question I've been struggling with and having little progress. Not looking for just the numbers, but also where they come from (ie. Sales of $161,500 - costs of $80,200 + Depreciation $9200) No pasting of links to similar problems; I want to use this exact problem with these exact numbers. I appreciate any help. Thanks;

Sheffield Co. shows the following information on its 2010 income statement: sales = $161,500; costs = $80,200; other expenses = $3,500; depreciation expense = $9,200; interest expense = $6,700; taxes = $21,665; dividends = $8,050. In addition, you're told that the firm issued $4,300 in new equity during 2010, and redeemed $7,300 in outstanding long-term debt

Assuming net fixed assets increased by $21,100 during the year, what was the addition to NWC?

Looking for a step by step answer to this question I've been struggling with and having little progress. Not looking for just the numbers, but also where they come from (ie. Sales of $161,500 - costs of $80,200 + Depreciation $9200) No pasting of links to similar problems; I want to use this exact problem with these exact numbers. I appreciate any help. Thanks;

Sheffield Co. shows the following information on its 2010 income statement: sales = $161,500; costs = $80,200; other expenses = $3,500; depreciation expense = $9,200; interest expense = $6,700; taxes = $21,665; dividends = $8,050. In addition, you're told that the firm issued $4,300 in new equity during 2010, and redeemed $7,300 in outstanding long-term debt

A)

Assuming net fixed assets increased by $21,100 during the year, what was the addition to NWC?

Explanation / Answer

Hi,

Please find the answer as follows:

Cash Flow to Creditors = Interest - New Long Term Debt = 6700 - 7300 = (600)

Cash Flow to Stockholders = Dividends - New Equity = 8050 - 4300 = 3750

Net Capital Spending = Increase in NFA + Depreciation = 9200 + 21100 = 30300

CFA = Cash Flow to Creditors + Cash Flow to Stockholders = (600) + 3750 = 3150

Operating Cash Flow = EBIT + Depreciation - Taxes = 68600 + 9200 - 21665 = 56135

CFA = OCF - Net Capital Spending - Change in NWC

3150 = 56135 - 30300 - Change in NWC

Change in NWC = 22685

Thanks.

Sales 161500 Costs 80200 Depreciation 9200 Other Expenses 3500 EBIT 68600 Interest 6700 Taxable Income 61900 Taxes 21665 Net Income 40235 Dividends 8050 Addition to Retained Earnings 32185

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