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 $ 11,000 $ 10,000 Operating costs excluding depreciation 9,526 8,656 Depreciation and amortization 410 360 Earnings before interest and taxes $ 1,064 $ 984 Less interest 280 200 Pre-tax income $ 784 $ 784 Taxes (25%) 196 196 Net income available to common stockholders $ 588 $ 588 Common dividends $ 205 $ 200 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2020 2019 Assets Cash $ 550 $ 500 Short-term investments 120 100 Accounts receivable 2,750 2,500 Inventories 1,550 1,400 Total current assets $ 4,970 $ 4,500 Net plant and equipment 3,750 3,500 Total assets $ 8,720 $ 8,000 Liabilities and Equity Accounts payable $ 1,100 $ 1,000 Accruals 550 500 Notes payable 186 100 Total current liabilities $ 1,836 $ 1,600 Long-term debt 1,100 1,000 Total liabilities $ 2,936 2,600 Common stock 4,601 4,600 Retained earnings 1,183 800 Total common equity $ 5,784 $ 5,400 Total liabilities and equity $ 8,720 $ 8,000 Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions. 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 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 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

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 $ 11,000 $ 10,000 Operating costs excluding depreciation 9,526 8,656 Depreciation and amortization 410 360 Earnings before interest and taxes $ 1,064 $ 984 Less interest 280 200 Pre-tax income $ 784 $ 784 Taxes (25%) 196 196 Net income available to common stockholders $ 588 $ 588 Common dividends $ 205 $ 200 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2020 2019 Assets Cash $ 550 $ 500 Short-term investments 120 100 Accounts receivable 2,750 2,500 Inventories 1,550 1,400 Total current assets $ 4,970 $ 4,500 Net plant and equipment 3,750 3,500 Total assets $ 8,720 $ 8,000 Liabilities and Equity Accounts payable $ 1,100 $ 1,000 Accruals 550 500 Notes payable 186 100 Total current liabilities $ 1,836 $ 1,600 Long-term debt 1,100 1,000 Total liabilities $ 2,936 2,600 Common stock 4,601 4,600 Retained earnings 1,183 800 Total common equity $ 5,784 $ 5,400 Total liabilities and equity $ 8,720 $ 8,000 Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions. 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 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 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

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 19SP

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Question

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	$	11,000		$	10,000
Operating costs excluding depreciation		9,526			8,656
Depreciation and amortization		410			360
Earnings before interest and taxes	$	1,064		$	984
Less interest		280			200
Pre-tax income	$	784		$	784
Taxes (25%)		196			196
Net income available to common stockholders	$	588		$	588
Common dividends	$	205		$	200

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

	2020		2019
Assets
Cash	$	550		$	500
Short-term investments		120			100
Accounts receivable		2,750			2,500
Inventories		1,550			1,400
Total current assets	$	4,970		$	4,500
Net plant and equipment		3,750			3,500
Total assets	$	8,720		$	8,000

Liabilities and Equity
Accounts payable	$	1,100		$	1,000
Accruals		550			500
Notes payable		186			100
Total current liabilities	$	1,836		$	1,600
Long-term debt		1,100			1,000
Total liabilities	$	2,936			2,600
Common stock		4,601			4,600
Retained earnings		1,183			800
Total common equity	$	5,784		$	5,400
Total liabilities and equity	$	8,720		$	8,000

Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.

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

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

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

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

What is the ROIC for 2020? 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 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

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