Question

1. USE Table Below , questions are all relevant to same problem so not too long.

2. What is the net operating profit after taxes (NOPAT) for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place.

3. $   million

4. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answers to one decimal place.

   2018 $   million

   2017 $   million

5. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answers to one decimal place.

   2018 $   million

   2017 $   million

6. What is the free cash flow for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place.

   $   million

7. What is the ROIC for 2018? Round your answer to one decimal places.

   %

8. 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 $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answers to one decimal place.

   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

Free Cash Flows
(All dollar values are provided in millions.)
2018				2017
Sales, ST Invest, Notes Pay, LT Debt factor increase	1.25			Sales	$6,500
Operating costs as % of sales	75.00%			Cash as % of sales	1.00%
Cash factor increase	1.25			Accts Rec as % of sales	12.00%
Accts. Rec factor increase	1.20			Inventory as % of sales	15.00%
Inventory factor increase	1.20			Net Plant & Equip as % of sales	28.00%
Net Plant & Equip factor increase	1.15			Accts Pay as % of sales	6.00%
Accts Pay factor increase	1.25			Accruals as % of Sales	4.00%
Accruals factor increase	1.10
				Operating cost as % of sales	85.00%
Depreciation as % of Net Plant & Equip	10.00%			Depreciation as % of Net Plant & Equip	10.00%
Interest rate	10.00%			Interest rate	10.00%
Tax rate	40.00%			Tax rate	40.00%
Payout rate	90.00%			Payout rate	80.00%
				Short-term investments as % of sales	0.50%
				Notes payable as % of sales	2.00%
				Long-term debt as % of sales	20.00%
				Retained earnings multiple factor	1.50
Income Statements:	2018		2017
Sales	$8,125.0		$6,500.0
Operating costs excluding depreciation	6,093.8		5,525.0
Depreciation and amortization	209.3		182.0
Earnings before interest and taxes	$1,822.0		$793.0
Less interest	174.7		139.8
Pre-tax income	$1,647.3		$653.3
Taxes	658.9		261.3
Net income available to common stockholders	$988.4		$392.0
Common dividends	$889.5		$313.6
Balance Sheets:	2018		2017
Assets
Cash	$81.3		$65.0
Short-term investments	40.6		32.5
Accounts receivable	936.0		780.0
Inventories	1,170.0		975.0
Total current assets	$2,227.9		$1,852.5
Net plant and equipment	2,093.0		1,820.0
Total assets	$4,320.9		$3,672.5
Liabilities and Equity
Accounts payable	$487.5		$390.0
Accruals	286.0		260.0
Notes payable	162.5		130.0
Total current liabilities	$936.0		$780.0
Long-term debt	1,625.0		1,300.0
Total liabilities	$2,561.0		$2,080.0
Common stock	1,543.5		1,474.9
Retained earnings	216.4		117.6
Total common equity	$1,759.9		$1,592.5
Total liabilities and equity	$4,320.9		$3,672.5
				FORMULAS
NOPAT2018				#N/A
NOWC2018				#N/A
NOWC2017				#N/A
Total net operating capital2018				#N/A
Total net operating capital2017				#N/A
Free cash flow2018				#N/A
ROIC2018				#N/A
Uses of free cash flow:
After-tax interest payment				#N/A
Reduction (increase) in debt				#N/A
Payment of dividends				#N/A
Repurchase (issue) stock				#N/A
Purchase (sale) of short-term investments				#N/A
Total				#N/A

Answer 1

Part a

NOPAT (2018) = EBIT*(1- tax rate) = 1822*(1-40%) = $1093.2

Part b

	2018	2017
Cash	81.3	65.0
Accounts receivable	936.0	780.0
Inventories	1170.0	975.0
Operating current assets (a)	2187.3	1820.0
Accounts payable	487.5	390.0
Accruals	286.0	260.0
Operating current liabilities (b)	773.5	650.0
Net operating working capital (NOWC) (a-b)	1413.8	1170.0

Part C

	2018	2017
Net operating working capital (NOWC)	1413.8	1170.0
Net plant and equipment	2093.0	1820.0
Total net operating capital	$3506.80	$2990.0

                        

Part D

	2018
NOPAT	1093.2
- Investment in total Net Operating capita	299
Free cash flow	$794.2

Part E

After-tax interest payment (174.7*(1-40%))	104.82
Reduction (increase) in debt (162.5-130)+(1625-1300)	(357.5)
Payment of dividends	889.5
Repurchase (Issue) stock (1543.5-1474.9)	(68.6)
Purchase (Sale) of short-term investments	$225.98
Free cash flow	$794.2