Question

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2017 Sales Operating costs excluding depreciation Depreciation and amortization Earnings before interest and taxes Less Interest Pre-tax income Taxes (40%) Net income available to common stockholders Common dividends 2018 $11,050.0 8,564.0 275.0 $2,211.0 238.0 $1,973.0 789.2 $1,183.8 $1,065.0 $8,500.0 7,225.0 230.0 $1,045.0 183.0 $862.0 344.8 $517.2 $414.0 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2018 2017 $112.0 56.0 1,169.0 2,656.0 $3,993.0 2,754.0 $6,747.0 $102.0 43.0 935.0 2,125.0 $3,205.0 2,295.0 $5,500.0 Assets Cash Short-term investments Accounts receivable Inventories Total current assets Net plant and equipment Total assets Liabilities and Equity Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity $956.0 995.0 221.0 $2,172.0 2,210.0 $4,382.0 2,091.2 273.8 $2,365.0 $765.0 765.0 170.0 $1,700.0 1,700.0 $3,400.0 1,945.0 155.0 $2,100.0

Answer 1

As per the rules answering only first 4 parts.

a) NOPAT = EBIT ( 1- Tax rate)

= 2211 ( 1 - 40%)

= 1326.6 million

b) NOWC = Operating Current asset - Operating current liabilities

= ( Total CA - short term investment) - ( Total CL - Notes payable)

2018

NOWC = ( 3993-56) - ( 2172 - 221)

= 3937 - 1951

= $ 1986 million

2017

NOWC = ( 3205 - 43 ) - ( 1700 - 170)

= 3162 - 1530

= $ 1632 million

c) Total OC = NOWC + Net fixed assets

2018

Total OC = 1986 + 2754

= $ 4740 million

2017

Total OC = 1632 + 2295

= $ 3927 million

d) FCF = NOPAT - Net investment in Operating capital

Net investment in OC = OC 2018 - OC 2017

= 4740 - 3927

= $ 813 million

FCF = 1326.6 - 813

= $ 513.6 million