$5.$ Consider a firm with an EBIT of $$859,000.$ The firm finances its assets with $$2,590,000$ debt $($costing $8\mathrm{.}4$ percent and is all tax deductible$)$ and $490,000$ shares of stock selling at $$6\mathrm{.}00$ per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $$1,000,000$ by selling an additional $290,000$ shares of stock. The firm's tax rate is $21$ percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $$859,000.$

Calculate the change in the firm's EPS from this change in capital structure.

Note: Do not round intermediate calculations and round your final answers to $2$ decimal places.

Question $7$: Ramakrishnan, Incorporated

Net Cash Flow from Operating Activities:

To calculate Ramakrishnan's $2024$ net cash flow from operating activities, we'll use the indirect method and apply the following adjustments:

Add: Depreciation expense $($$$3,300,000)$

Subtract:

Increase in accounts receivable $($$$4$ million$)$

Increase in inventory $($$$94$ million$)$

Increase in accrued wages and taxes $($$$10$ million$)$

Decrease in accounts payable $($$$8$ million$)$

Decrease in notes payable $($$$5$ million$)$

Here's the calculation:

Net Cash Flow from Operating Activities $=$

$$80,000,000($Net Income$)+$ $$3,300,000($Depreciation$)-$

$$4,000,000(\backslash$Delta Accounts Receivable$)-$ $$94,000,000(\backslash$Delta Inventory$)-$

$$10,000,000(\backslash$Delta Accrued Wages & Taxes$)+$ $$8,000,000(\backslash$Delta Accounts Payable$)+$

$$5,000,000(\backslash$Delta Notes Payable$)=-$$$26,700,000$

Therefore, Ramakrishnan's $2024$ net cash flow from operating activities is $-$$$26,700,000.$ This indicates that the company used $$26\mathrm{.}7$ million more cash for its operations than it generated from revenue in $2024.$

Question $8$: Usher Sports Shop

Cash Flow from Operations:

We can solve for Usher Sports Shop's cash flow from operations using the following equation:

Cash Flow from Operations $=$ Change in Cash $+$ Cash Flows from Investing Activities $+$

Cash Flows from Financing Activities

Here's the calculation:

Cash Flow from Operations $=$ $$1,744,000($Ending Cash$)-$ $$1,616,000($Beginning Cash$)-$

$-$$$4,374,000($Cash Flows from Investing$)-$ $$5,885,000($Cash Flows from Financing$)=$

$-$$$5,825,000$

Therefore, Usher Sports Shop's cash flow from operations is $-$$$5,825,000.$ This negative value indicates that the company used $$5\mathrm{.}825$ million more cash for its operations than it generated from revenue in $2024.$

Question $9$: Fields and Struthers, Incorporated

NPAT $($Net Operating Profit After Tax$)$:

NPAT $=$ EBIT $*(1-$ Tax Rate$)+$ Depreciation $=$ $$92,000,000*(1-0\mathrm{.}21)+$ $$6,000,000=$

$$73,560,000$

Operating Cash Flow:

We're missing essential information about changes in other current assets and current liabilities, hindering the exact calculation.

Assuming no changes in other current assets and current liabilities, we can estimate:

Operating Cash Flow $($Estimate$)=$ EBIT $+$ Depreciation $-$ Taxes $-\backslash$Delta Gross Fixed Assets $+$

$\backslash$Delta Accounts Receivable $=$ $$92,000,000+$ $$6,000,000-($$$92,000,000*0\mathrm{.}21)-$

$$58,000,000=-$$$33,940,000($Note: This is an estimate$)$

Investment in Operating Capital:

Investment in Operating Capital $=\backslash$Delta Current Assets $-\backslash$Delta Spontaneous Current Liabilities $=$

$$46,000,000-$ $$38,000,000=$ $$8,000,000$

Free Cash Flow:

Free Cash Flow $=$ NOPAT $-$ Depreciation $-\backslash$Delta Gross Fixed Assets $-\backslash$Delta Investment in Operating Capital $=$

$$73,560,000-$ $$6,000,000-$ $$58,000,000-$ $$8,000,000=$ $$9,560,000$

Rounding $($as specified$)$:

NOPAT: $$73,560,000$

Operating Cash Flow $($Estimate$)$: $-$$$33,940,000$

Investment in Operating Capital: $$8,000,000$

Free Cash