Question

Use the following information to answer this question Windswept, Inc. Current Income Statement (S in millions) $ 9,400 Net sales Less: Cost of goods sold Less: Depreciation Earnings before interest and taxes Less: Interest paid axable Income Less: Taxes Net income Dividends 315 $1,595 91 $1,504 451 $1,053 $803

Note that OCF is $1,459 and Net Capital Spending is 775. What is the Cash Flow from Assets?

A) $924 million

B) -$230 million

C) $914 million

D) $454 million (I tried this option & it was incorrect)

E) -$626 million

Answer 1

Computation of CASH FLOWS FROM ASSETS

1) cash flows from operations

Net income = $1053

Add: depreciation $ 315

Interest $91

Cash flows from operations = $ 1459

2) Changes in working capital

	Last year	current year
Cu. Assets	$2980	$2895
Less: Cu. Liabilities	$1440	$1585
Net w.capital	$1540	$1310

Changes in working capital = 1540 - 1310 = $230

3) Net capital spending = ($775)

CASH FLOWS FROM ASSETS

$1459 + $230 - $775 = $914

Option C) $914 million