Finding operating and free cash flows Consider the following balance sheets and selected data from the income statement of Keith Corporation December 31

Assets 2015 2014

Cash $ 1,500 $ 1,000

Marketable securities 1,800 1,200 Accounts receivable 2,000 1,800 Inventories 2,900 2,800 Total current assets $ 8,200 $ 6,800 Gross fixed assets $29,500 $28,100 Less: Accumulated depreciation 14,700 13,100 Net fixed assets $14,800 $15,000 Total assets $23,000 $21,800 Liabilities and stockholders equity Accounts payable $ 1,600 $ 1,500 Notes payable 2,800 2,200 Accruals 200 300 Total current liabilities $ 4,600 $ 4,000 Long-term debt 5,000 5,000 Total liabilities $ 9,600 $ 9,000 Common stock $10,000 $10,000 Retained earnings 3,400 2,800 Total stockholders equity $13,400 $12,800 Total liabilities and stockholders equity - $23,000 $21,800

KEITH CORPORATION INCOME STATEMENT DATA (2015)

Depreciation expense $1,600 Earnings before interest and taxes (EBIT) 2,700 Interest expense 367 Net profits after taxes 1,400 Tax rate 40%

Calculate the firms net operating profit after taxes (NOPAT) for the year ended December 31, 2015, using Equation 4.1. b. Calculate the firms operating cash flow (OCF) for the year ended December 31, 2015, using Equation 4.3. c. Calculate the firms free cash flow (FCF) for the year ended December 31, 2015, using Equation 4.4. d. Interpret, compare, and contrast your cash flow estimates in parts b and c.