Question
4. The Alabaster Corp. reported Net sales of 6.7 million, operating costs of 4.3 million, and depreciation of $480,000 in 2009. Their interest charges were
4. The Alabaster Corp. reported Net sales of 6.7 million, operating costs of 4.3 million, and depreciation of $480,000 in 2009. Their interest charges were $325,000. They had cash, accounts receivable and inventories of $1.8 million, $5.6 million and $4.2 million, respectively, at the end of 2009. At the end of 2008, those three accounts were $1.9 million, $4.5 million, and $3.4 million respectively. Accounts payable and accruals were $3.0 million and $1.4 million, respectively, at the end of 2009, while at the end of 2008 they were $2.9 million and $1.3 million, respectively. Net plant and equipment was $12.8 million at the end of 2009 and $12.2 million at the end of 2008. Calculate Alabasters Net Income, Free Cash Flow and Return on Invested Capital for 2009. Assume a flat tax rate of 40%. How is the Free Cash Flow interpreted? In other words, what does it measure? (12 pts.)
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