Free Cash Flows
Rhodes Corporation’s financial statements are shown below.
Rhodes Corporation: Income Statements for Year Ending December 31
(Millions of Dollars)
2020 2019
Sales $ 12,000 $ 10,000
Operating costs excluding depreciation 10,506 8,614
Depreciation and amortization 430 390
Earnings before interest and taxes $ 1,064 $ 996
Less interest 280 200
Pre-tax income $ 784 $ 796
Taxes (25%) 196 199
Net income available to common stockholders $ 588 $ 597
Common dividends $ 204 $ 200
Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
2020 2019
Assets
Cash $ 550 $ 500
Short-term investments 210 200
Accounts receivable 2,750 2,500
Inventories 1,750 1,600
Total current assets $ 5,260 $ 4,800
Net plant and equipment 3,750 3,500
Total assets $ 9,010 $ 8,300
Liabilities and Equity
Accounts payable $ 1,100 $ 1,000
Accruals 550 500
Notes payable 182 100
Total current liabilities $ 1,832 $ 1,600
Long-term debt 1,100 1,000
Total liabilities $ 2,932 2,600
Common stock 4,794 4,800
Retained earnings 1,284 900
Total common equity $ 6,078 $ 5,700
Total liabilities and equity $ 9,010 $ 8,300
Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.
a, What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.
$ million
b. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
2020: $ million
2019: $ million
c. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
2020: $ million
2019: $ million
d. What is the free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to the nearest whole number.
$ million
e. What is the ROIC for 2020? Round your answer to two decimal places.
%
f. 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 answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
After-tax interest payment $ million
Reduction (increase) in debt $ million
Payment of dividends $ million
Repurchase (Issue) stock $ million
Purchase (Sale) of short-term investments $ million
