Question

Midterm qu File View Tell me what you want to do... - . General Home Insert Page Layout Formulas Data Review X out Arial .10 - AA === Da Copy Format Painter inter BIU S .A.- Clipboard Font & Wrap Text Merge & Center - Norma Check Paste $ % & Conditional Format as Formatting Table Alignment Number P30 G ABC F F 1 MID TERM EXAMINATION QUESTION 2 REQUIRED: Based on the financial statements below, use the table at the right to compute free cash flow for 2019, then list and total the individual uses of cash flow (should reconcile to free cash flow: cell H16 = cell H24. 2019 COMPUTATION OF FREE CASH FLOW; NOPAT = EBIT (1-1) 2018 NA OPERATING CURRENT ASSETS OPERATING CURRENT LIABILITIES NET OPERATING WORKING CAPITAL NET FIXED ASSETS TOTAL NET OPERATING CAPITAL from cell H6 NOPAT - Investment in Net Operating Capital =FREE CASH FLOW 6 Joshua & White Technologies: December 31 Balance Sheets 7 Assets 2019 2018 8 Cash and cash equivalents $550 $500 9 Short-term investments 110 100 10 Accounts Receivable 2,750 2,500 11 Inventories 1,650 1.500 12 Total current assets $5,060 $4,600 13 Net fixed assets 3.850 3.500 14 Total assets $8.910 $8,100 15 Liabilities and equity 16 Accounts payable $1,100 $1,000 17 Accruals 550 500 18 Notes payable 384 200 19 Total current liabilities $2,034 $1,700 20 Long-term debt 1,100 1.000 21 Total liabilities $3,134 $2,700 22 Common stock 4,312 4,400 23 Retained Earnings 1,464 1,000 24 Total common equity $5,776 $5,400 25 Total liabilities and equity $8.910 $8,100 26 Joshua & White Technologies December 31 Income Statements 2019 2018 28 Sales $11,000 $10,000 29 COGS except excluding depr. and are 9,612 8,728 30 Depreciation and Amortization 380 360 31 EBIT $1,008 $912 32 Interest Expense 120 100 33 EBT $888 $812 34 Taxes (25%) 222 203 35 Net Income $666 $609 36 Common dividends $202 $200 37 USES OF FCF(should add up to CELL H18) After tax interest payment Reduction (increase) in LT & ST borrowings Payment of Dividends Repurchase (issue) stock Purchase (sale) of short term securities =TOTAL USES OF FCF 39 40 Build a Model Ready PE Da

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Answer 1

					working notes
COMPUTATION FREE CASHFLOW	2019	2018			EBIT	1008
					Tax rate	25%
NOPAT =EBIT(1-t)	756				NOPAT(EBIT*(1-t)	756
OPERATING CURRENT ASSETS	4400	4000			Depreciation and amortisation	380
OPERATING CURRENT LIABILITIES	1650	1500			Changes in WC	2019	2018
					Total current assets	4400	4000
NET OPERATING WORKING CAPITAL	2750	2500			Total current liabilities	1650	1500
NET FIXED ASSETS	3850	3500
TOTAL NET OPERATING CAPITAL	6600	6000
					Capital Expenditure
NOPAT	756
-Investment in Net Operating Capital	600				Opening Net fixed assets	3500
=FREE CASH FLOW	156				Less depreciation for Yr 2019	-380
						3120
USES OF FCF					Closing Net Fixed Assets	3850
After tax interest payment	90				Capital Expenditure	730
Reduction (increase) in LT & ST borrowings	-284
Payment of dividends	202
Repurchase (issue) stock	88
Purchase (sale) of short term securities	-10
	86