Challenging Problems: Intermediate Financial Management 12th edition

6-12 Free Cash Flows

Using Rhodes Corporation's financial statements, answer the following questions

a. What is the net operating profit after taxes (NOPAT) for 2015?

b. What are the amounts of net operating capital for both years?

c. What are the amounts of total net operating capital for both years?

d. What is the free cash flow for 2015?

e. What is the ROIC for 2015?

f. How much of the FCF did Rhodes use for each of hte following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, net purchases of short term investments?

Rhodes Corporation Income Statements for Year Ending December 31 (Millions of Dollars)

	2014	2015
Sales	$11,000	10,000
Operating costs excluding depreciation	9,360	8,500
Depreciation and amortization	380	360
Earnings before interest and taxes	1260	1140
Less interest	120	100
Pre-tax income	1,140	1,040
Taxes (40%)	456	416
Net income available to common stockholders	684	624
Common dividends	220	200

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

	2015	2014
Assets
Cash	550	500
Short-term investments	110	100
Accounts receivable	2,750	2,500
Inventories	1,650	1,500
Total current assets	5,060	4,600
Net plant and equipment	3,850	3,500
Total assets	8,910	81,00
Liabilities and Equity
Accounts Payable	1,100	1,000
Accruals	550	500
Notes Payable	384	200
Total current liabilites	2,034	1,700
Long-term debt	1,100	1,000
Total liabilities	3,134	2,700
Common stock	4,312	4,400
Retained earnings	1,464	1,000
Total common equity	5,776	5,400
Total liabilities and equity	8,910	8,100