FREE CASH FLOW Financial information for Powell Panther Corporation is shown here.

Powell Panther Corporation: Income Statements for Year Ending December 31

(Millions of Dollars)

2014 2013 Sales $1,200.0 $1,000.0 Operating costs excluding depreciation and amortization 1,020.0 850.0 EBITDA $ 180.0 $ 150.0 Depreciation & amortization 30.0 25.0 Earnings before interest and taxes (EBIT) $ 150.0 $ 125.0 Interest 21.7 20.2 Earnings before taxes (EBT) $ 128.3 $ 104.8 Taxes (40%) 51.3 41.9 Net income $ 77.0 $ 62.9 Common dividends $ 60.5 $ 46.4 Powell Panther Corporation: Balance Sheets as of December 31

(Millions of Dollars)

2014 2013 Assets Cash and equivalents $ 12.0 $ 10.0 Accounts receivable 180.0 150.0 Inventories 180.0 200.0 Total current assets $372.0 $360.0 Net plant and equipment 300.0 250.0 Total assets $672.0 $610.0 Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars)
2014 2013 Liabilities and Equity Accounts payable $108.0 $ 90.0 Accruals 72.0 60.0 Notes payable 67.0 51.5 Total current liabilities $247.0 $201.5 Long-term bonds 150.0 150.0 Total liabilities $397.0 $351.5 Common stock (50 million shares) 50.0 50.0 Retained earnings 225.0 208.5 Common equity $275.0 $258.5 Total liabilities and equity $672.0 $610.0

a. What was net operating working capital for 2013 and 2014?

b. What was the 2014 free cash flow?

c. How would you explain the large increase in 2014 dividends?AppendixLO1