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 $ 12,000   $ 11,000

Operating costs excluding depreciation 10,592   9,726

Depreciation and amortization 380   350

    Earnings before interest and taxes $ 1,028   $ 924

Less interest 180   100

    Pre-tax income $ 848   $ 824

Taxes (25%) 212   206

Net income available to common stockholders $ 636   $ 618

Common dividends $ 202   $ 200

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

  2020   2019

Assets

Cash $ 550   $ 500

Short-term investments 230   200

Accounts receivable 2,750   2,500

Inventories 1,550   1,300

    Total current assets $ 5,080   $ 4,500

Net plant and equipment 3,750   3,500

Total assets $ 8,830   $ 8,000

 

Liabilities and Equity

Accounts payable $ 1,100   $ 1,000

Accruals 550   500

Notes payable 176   100

    Total current liabilities $ 1,826   $ 1,600

Long-term debt 1,100   1,000

    Total liabilities $ 2,926   2,600

Common stock 4,670   4,600

Retained earnings 1,234   800

    Total common equity $ 5,904   $ 5,400

Total liabilities and equity $ 8,830   $ 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