Free Cash Flows Rhodes Corporation: Income Statements for Year Ending December 3
ID: 2729407 • Letter: F
Question
Free Cash Flows
Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)
Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
Using Rhodes Corporation's financial statements (shown above), answer the following questions.
What is the net operating profit after taxes (NOPAT) for 2013? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
$ million
What are the amounts of net operating working capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
2013 $ million
2012 $ million
What are the amounts of total net operating capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
2013 $ million
2012 $ million
What is the free cash flow for 2013? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
$ million
What is the ROIC for 2013? Round your answer to two decimal places.
%
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 answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
2013 2012 Sales $5,850.0 $4,500.0 Operating costs excluding depreciation 4,973.0 3,825.0 Depreciation and amortization 150.0 131.0 Earnings before interest and taxes $727.0 $544.0 Less: Interest 126.0 97.0 Pre-tax income $601.0 $447.0 Taxes (40%) 240.4 178.8 Net income available to common stockholders $360.6 $268.2 Common dividends $325.0 $215.0Explanation / Answer
1)
NOPAT = EBIT*(1-T)
NOPAT = $727.0*(1-40%)
NOPAT = $436.2 million.
2)
NOWC = Operating Current assets – Operating Current Liabilities
NOWC (2013) = (Cash +Account Receivable+Inventories) – (Account Paybale + Accruals)
NOWC (2013) = ($58 + $563+ $1404) – ($518 + $410)
NOWC (2013) = $1,097 million
NOWC (2012) = (Cash +Account Receivable+Inventories) – (Account Paybale + Accruals)
NOWC (2012) = ($50 + $450+ $1080) – ($450 + $315)
NOWC (2012) = $815 million
3)
Net Operating Capital (NOC) = NOWC + operating Long term assets
So,
NOC (2013) = $1,097+ $1501
NOC (2013) = 2,598million
NOC (2012) = $815+ $1305
NOC (2012) = 2120 Million
4)
Free cash flow = NOPAT – change in Operating Working Capital – New Investment in fixed assets
Free cash flow = NOPAT – (NOWC 2013 – NOWC 2012) – ($1,501-$1305)
Free cash flow = $436.2– ($1,097- $815) – ($1,501-$1,305)
Free cash flow = ($41.8) Million.
5) ROIC = NOPAT / Total Net Operating capital
ROIC = $436.2/ $2,598
ROIC = 16.78%
6)
After-tax interest payment
$75.6 million
Reduction (increase) in debt
($297) million
Payment of dividends
$325 million
Repurchase (Issue) stock
152.4 million
Purchase (Sale) of short-term investments
$7 million
Calculation-
After Tax Interest Payment = Interest*(1-T)
After Tax Interest Payment = $126*(1-40%)
After Tax Interest Payment = $75.6 million
Increase in Debt = Increase in Note payable + Increase in LT Debt
Increase in Debt = ($117-$90) + ($1170-$900)
Increase in Debt = $297 million
Issue of stock = $1,225.4 - $1073
Issue of stock = 152.4 million
Purchase of ST Investment = $30.0 - $23.0
Purchase of ST Investment = $7 million
1)
NOPAT = EBIT*(1-T)
NOPAT = $727.0*(1-40%)
NOPAT = $436.2 million.
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