Question

8) The latest balance sheet and income statement for Coleco Corporation are below: 2016 2017 Assets Cash and equivalents 57,600 7.282 Accounts receivable 351,200 632,160 Inventories 715,200 1.287,360 Total current assets 1,124,000 1,926,802 Net fixed assets 344.800 939,790 Total Assets 1,467.800 2.866.592 - Liabilities and Equity Accounts payable Accruals Notes Payable Total current liabilities Long-term bonds Common Equity: Common stock (100,000 shares) Retained earnings Total common equity Total liabilities & equity 145,600 136,000 200.000 481,600 323,432 524,160 489,600 636,808 1,650,568 723,432 460,000 230.768 663,768 1.467.800 460,000 32.592 492,592 2.866.592 2017 Income Statement Sales Operating costs Depreciation and amortization - EBIT - Interest Expenses - ЕВТ - Taxes (@40%) Net Income 2016 3,432,000 3,222,672 18.900 190,428 43,828 146,600 58.640 87.960 6,034,000 6,047,988 116,960 (130,948) 136,012 (266,960) (106.784 (160.176 a) Estimate Net Operating Working Capital for 2016 and 2017 b) Estimate Capex for 2017. c) Estimate Coleco's 2017 Free Cash Flow. Sudha Krishnawami Lecture Notes

Answer 1

Ans. Net Operating working capital = Operating assets -operating liabilities

Operating assets

                                        2016                 2017

Cash and cashequivalent                 57600                  7282

Account receivable                          351200 632160

Inventories                                      715200                1287360

Operating assets(1)                      1124000 1926802

Account payable                             145600               524160

Accruals                                        136000               489600

Note payable                                  200000              636808

Operating liabilities (2)          481600    1650568

Net operating working capital(1-2) 642400    276234

if note payable are short term for 2016 = 642400

                                                For 2017 = 276234

Ans b) Calculation of Capex for the year of 2017

Net Fixed assets value at the year end of 2017 =   939790

Add: Depreciation during the year                     = 116960

Less: Net fixed assets value last year = (344800)

Capex during the year of 2017       =    711950

Ans c) Calculation of Free cash flow of the firm for the year of 2017

EBIT for the year of 2017                             =      -130948

Less: Interest payment                               =      - 136012

Less: Tax                                                  =           -

Add: Depreciation                                      =     116960

Change in working capital                         =       366166

Less: Capex                                   =    -711950

Free cash flow for the year                        =      (495784)

           

Note working capital =

for 2016   = 1124000-481600 = 642400

for 2017   = 1926802-1650568 = 276234

Decrease of working capital     = 366166