Question
Financial information for Powell Panther Corporation is shown below: Powell Panther Corporation: Income Statements for Year Ending December 31 (millions of dollars) 2021 2020 Sales
Financial information for Powell Panther Corporation is shown below:
Powell Panther Corporation: Income Statements for Year Ending December 31 (millions of dollars)
| 2021 | 2020 | |||
| Sales | $ | 2,500.0 | $ | 2,000.0 |
| Operating costs excluding depreciation and amortization | 1,875.0 | 1,700.0 | ||
| EBITDA | $ | 625.0 | $ | 300.0 |
| Depreciation and amortization | 55.0 | 46.0 | ||
| Earnings before interest and taxes (EBIT) | $ | 570.0 | $ | 254.0 |
| Interest | 55.0 | 44.0 | ||
| Earnings before taxes (EBT) | $ | 515.0 | $ | 210.0 |
| Taxes (25%) | 206.0 | 84.0 | ||
| Net income | $ | 309.0 | $ | 126.0 |
| Common dividends | $ | 278.1 | $ | 100.8 |
Powell Panther Corporation: Balance Sheets as of December 31 (millions of dollars)
| 2021 | 2020 | |||
| Assets | ||||
| Cash and equivalents | $ | 26.0 | $ | 22.0 |
| Accounts receivable | 242.0 | 220.0 | ||
| Inventories | 483.0 | 420.0 | ||
| Total current assets | $ | 751.0 | $ | 662.0 |
| Net plant and equipment | 552.0 | 460.0 | ||
| Total assets | $ | 1,303.0 | $ | 1,122.0 |
| Liabilities and Equity | ||||
| Accounts payable | $ | 220.0 | $ | 200.0 |
| Accruals | 130.0 | 100.0 | ||
| Notes payable | 50.0 | 40.0 | ||
| Total current liabilities | $ | 400.0 | $ | 340.0 |
| Long-term bonds | 500.0 | 400.0 | ||
| Total liabilities | $ | 900.0 | $ | 740.0 |
| Common stock | 334.3 | 344.2 | ||
| Retained earnings | 68.7 | 37.8 | ||
| Common equity | $ | 403.0 | $ | 382.0 |
| Total liabilities and equity | $ | 1,303.0 | $ | 1,122.0 |
Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest dollar, if necessary. Negative values, if any, should be indicated by a minus sign.
a. What was net operating working capital for 2020 and 2021? Assume the firm has no excess cash.
2020: ____ $
2021: ____ $
b. What was the 2021 free cash flow?
$ ________
c. How would you explain the large increase in 2021 dividends?
I. The large increase in net income from 2020 to 2021 explains the large increase in 2021 dividends.
II. The large increase in free cash flow from 2020 to 2021 explains the large increase in 2021 dividends.
III. The large increase in EBIT from 2020 to 2021 explains the large increase in 2021 dividends.
IV. The large increase in sales from 2020 to 2021 explains the large increase in 2021 dividends.
V. The large increase in retained earnings from 2020 to 2021 explains the large increase in 2021 dividends.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
7th Edition
013213683X, 978-0132136839
