Problem 2-12 Free Cash Flows Rhodes Corporation: Income Statements for Year Endi

Question

Problem 2-12
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 2016? 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.
2016 $ __________ million
2015 $___________ 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.
2016 $________ million
2015 $ __________ million

What is the free cash flow for 2016? 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 2016? 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.

2016 2015 Sales $11,250.0 $9,000.0 Operating costs excluding depreciation 8,719.0 7,650.0 Depreciation and amortization 304.0 243.0 Earnings before interest and taxes $2,227.0 $1,107.0   Less: Interest 242.0 194.0 Pre-tax income $1,985.0 $913.0   Taxes (40%) 794.0 365.2 Net income available to common stockholders $1,191.0 $547.8 Common dividends $1,072.0 $438.0

Explanation / Answer

1) NOPAT EBIT $2,227 Millions Less: Tax Rate 40% -$890.8 Millions Net operating profit after taxes (NOPAT) $1,336.2 Millions 2) Net Operating Working Capital = Operating Current Assets - Operating Current Liabilities 2016 2015 Operating Current Assets Millions Millions Cash $129 $99 Accounts receivable 1089 990 Inventories 1755 1350 Total Operating current assets $2,973 $2,439 Less: Operating Current Liabilities Accounts payable $648 $540 Accruals 324 270 Total Operating current liabilities $972 $810 NOWC = OCA - OCL $2,001 $1,629 Millions 3) 2016 2015 Total net operating capital Millions Millions Net Operating Working Capital $2,001 $1,629 Add: Net plant and equipments $3,038 $2,430 Total net operating capital $5,039 $4,059 milions 4) Free cash flow for 2016 NOPAT $1,336.2 millions Less: Investment in total net operating Capital($5039 -$4059)millions -$980 millions Free cash flow for 2016 $356.2 millions 5) ROIC for 2016 Return on invested capital (ROIC) = NPOAT/Total net operating capital = $1336.2/$5039 26.52%

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