ezto.mheducation.com/hm.tPX [21 Mitchell Industries had the following operating

Question

ezto.mheducation.com/hm.tPX [21 Mitchell Industries had the following operating results for 2014 sales = $27,960 cost of goods sold = $19,360 depreciation expense = $4,940; interest expense = $2,190; dividends paid = $1,050. At the beginning of the year, net fixed assets were $16,680, current assets were $5,780, and current liabilities were $3,300. At the end of the year, net fixed assets were $20,260 current assets were $7,116, and current liabilities were 3,840 The tax rate for 2014 was 30 percent. a. What wn iarn far 2014? (Do not rourid intermediate calculatians.) Net in b. What s th aprratg cashw r 2014 (Da not round intermediate calculations. Uperating cash flow c. what was the cash flow from ssets-or 20197 Do not round intermediate calculations. Negative amount should be Indicated by a minus sign h flow frDm a d-1 If no new cebt was ssued during the year, what was the cash low to creditors? (Do not round d-2 If ri riw dr ws isnd during hyer, what was th ch fl t stackh Da nat raund Intermedlate calculations. Negative amount should be Indicated by a minus slgn.) Casn flow to stockholders References sBook & Resources Worksheet Difficulty: 2 Intermedlate

Explanation / Answer

a) Income statement

Net income = Sales - cost of goods sold - depreciation - Interest - taxes

Income without taxes = Sales - cost of goods sold - depreciation - Interest = 27960 - 19360 - 4940 - 2190 = 1470$

Net income = 1470 - 30% of 1470 (Tax) = 1029$

b)

OCF = Ebit + Depreciation - Taxes

=> (27960 - 19360 - 4940) + (4940) - 30% of 1470

=> 9041

c)

Change in NWC = (CAend - CLend) - (CAbeg - CLbeg)

=> (7116-3840) - (5780 - 3300)

=> 796

Net capital spending = NFAend - NFAbeg + Depreciation

=> 20260 - 16680 + 4940

=> 8520

CFA = OCF - Change in nWC - net capital spending

=> 9041 - 796 - 8520

=> -275

d)

cash flow to stakeholders = cash flow from assets - cash flow to creditors

=> -275 - 2190

=> -2465

net new equity = divident - cash flow to stakeholders

=> 1050 + 2465 = 3515

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