Question

A late penalty of 70% will apply to new answers. Intro Below is the balance sheet for Northern Comfort Company for December 31 of 2018 and 2019. Cash Accounts receivable Inventory Current assets Net fixed assets 2018 2019 850 1,000 2,550 3,000 2,550 3,000 5,950 7,000 11,050 13,000 17,000 20,000 2018 2019 Accounts payable 2,550 3,000 Current liabilities 2,550 3,000 Long-term debt 5 ,100 6,000 Total liabilities 7,650 9,000 Equity 9,350 11,000 Total liab. & equity 17,000 20,000 Total assets The income statement for 2019 is also given: Amount Sales Cost Depreciation EBIT Interest EBT Taxes (27%) Net income 48,000 26,400 7,200 14,400 4,800 9,600 2,592 7,008

Answer 1

Part 1]

NOPAT = EBIT * (1 - tax rate)

NOPAT = 14,400 * (1 - 27%) = 10,512

NOPAT + depreciation = 10,512 + 7,200 = 17,712

Part 2]

Change in NOWC = change in accounts receivable + change in inventory - change in accounts payable

Change in NOWC = (3000 - 2550) +(3000 - 2550) - (3000 - 2550) = 450

Part 3]

Capital expenditure = change in net fixed assets

Capital expenditure = 13000 - 11050 = 1,950

Part 4]

FCF = NOPAT + depreciation - Change in NOWC - Capital expenditure

FCF = 17712 - 450 - 1950 = 15,312