FIN 404 Section 3 Practice Problems

The answers are given, need the formulas and work to show how the answer were received.

1. Create the operating activities section of the Direct Statement of Cash Flows. 2. Calculate the 2017 Free Cash Flow of the Firm. 3. Calculate the 2017 Free Cash Flow of Equity. 4. Calculate the Return on Net Operating Assets. 5. Calculate the Return on Common Equity. 6. Calculate the Sustainable Growth Rate. 7. Calculate the Internal Growth Rate. 8. Create a 2018 projected Income Statement, using a 10% growth rate. 9. Create a 2018 projected Balance Sheet, using a 10% growth rate.

Answers

1. Cash receipts from customers = $44,690, cash paid for inventories = $26,610, cash paid for operating expenses = $11,006, Change in Cash from Operating Activities = $7,074. 2. NOPAT = $6,529.70, Change in Operating Capital = $2,489, FCFF = $4,040.70 3. FCFE = $4,823.15 4. RNOA = .3608 or 36.08% 5. ROCE = .7115 or 71.15% 6. Sustainable growth = .1388 or 13.88% 7. Internal growth = .0704 or 7.04%

FIN 404 Section 3 Practice Problems Use the following financial statements to answer the questions. FIN Corporation Balance Sheet Cash $ $ Receivables Inventories Other current assets 2016 499 3,831 4,449 869 2017 626 4,141 4,809 869 Total current assets 9,648 10,445 Property, plant, and equipment (PP&E) Accumulated depreciation 18,442 4,909 21,861 6,172 Net property, plant, and equipment Other noncurrent assets 13,533 973 15,689 973 Total assets $ 24,154 $ 27,107 $ $ 4,496 Accounts payable Current portion of long-term debt Accrued expenses Income taxes payable 4,160 905 1,566 423 ***1959 19 1 58448999948 892 1,693 424 Total current liabilities 7,054 7,505 Deferred income taxes and other liabilities Long-term debt 1,152 8,088 1,152 9,396 Total liabilities 16,294 18,053 Preferred stock Common stock Capital surplus Retained earnings 0 75 1,098 6,687 75 1,118 7,861 Shareholders' equity 7,860 9,054 Total liabilities and net worth $ 24,154 $ 27,107 FIN Corporation Income Statement $ Net Sales Cost of goods sold 2017 45,000 26,250 Gross profit Selling, general, and administrative expense Depreciation and amortization expense Interest expense 18,750 9,805 1,263 603 7,079 Income before taxes Income tax expense 1,062 Net income $ 6,017 905 Outstanding shares Current Stock Price 25 FIN Corporation Statement of Cash Flows (Indirect Method) $ 2017 6,017 1,263 310 360 Net Income Depreciation and amortization expense Change in Receivables Change in Inventories Change in Other Current Assets Change in Accounts Payabale Change in Accrued Expenses Change in Income Taxes Payable Change in Cash from Operating Activities 336 127 $ 7,074 $ 3,419 Change in Gross PP&E Change in Other Noncurrent Assets Change in Cash from Investing Activities $ (3,419) $ 1,295 Change in Debt Change in Other Long-term Liabilities Change in Equity Dividends Paid Change in Cash from Financing Activities 20 4,843 (3,528) $ $ Change in Cash Beginning Cash Ending Cash 127 499 626 FIN 404 Section 3 Practice Problems Use the following financial statements to answer the questions. FIN Corporation Balance Sheet Cash $ $ Receivables Inventories Other current assets 2016 499 3,831 4,449 869 2017 626 4,141 4,809 869 Total current assets 9,648 10,445 Property, plant, and equipment (PP&E) Accumulated depreciation 18,442 4,909 21,861 6,172 Net property, plant, and equipment Other noncurrent assets 13,533 973 15,689 973 Total assets $ 24,154 $ 27,107 $ $ 4,496 Accounts payable Current portion of long-term debt Accrued expenses Income taxes payable 4,160 905 1,566 423 ***1959 19 1 58448999948 892 1,693 424 Total current liabilities 7,054 7,505 Deferred income taxes and other liabilities Long-term debt 1,152 8,088 1,152 9,396 Total liabilities 16,294 18,053 Preferred stock Common stock Capital surplus Retained earnings 0 75 1,098 6,687 75 1,118 7,861 Shareholders' equity 7,860 9,054 Total liabilities and net worth $ 24,154 $ 27,107 FIN Corporation Income Statement $ Net Sales Cost of goods sold 2017 45,000 26,250 Gross profit Selling, general, and administrative expense Depreciation and amortization expense Interest expense 18,750 9,805 1,263 603 7,079 Income before taxes Income tax expense 1,062 Net income $ 6,017 905 Outstanding shares Current Stock Price 25 FIN Corporation Statement of Cash Flows (Indirect Method) $ 2017 6,017 1,263 310 360 Net Income Depreciation and amortization expense Change in Receivables Change in Inventories Change in Other Current Assets Change in Accounts Payabale Change in Accrued Expenses Change in Income Taxes Payable Change in Cash from Operating Activities 336 127 $ 7,074 $ 3,419 Change in Gross PP&E Change in Other Noncurrent Assets Change in Cash from Investing Activities $ (3,419) $ 1,295 Change in Debt Change in Other Long-term Liabilities Change in Equity Dividends Paid Change in Cash from Financing Activities 20 4,843 (3,528) $ $ Change in Cash Beginning Cash Ending Cash 127 499 626