Income Statement and Balance Sheet Free Cash Flow and Equity Free Cash Flow Actual Year -1 Actual Year 0 Forecast Year 1 Actual Year O Forecast Year 1 $3,180 -795 $3,935 -984 $ 9,568 -5,262 -1,091 $9,759 -5,368 -1,212 $10,735 -5,368 -1,433 Income Statement Revenue Operating expenses. Depreciation expense. Earnings before interest and taxes Interest expense.. Income before taxes. Income tax expense. Net income... $ 3,215 0 $3,180 $ 3,935 2-1 2-2 7-3 7-1 $2.951 1,433 7-15 7-16 -2,372 $ 3,215 -804 Earnings before interest and taxes (EBIT) - Income taxes paid on EBIT Earnings before interest and after taxes + Depreciation expense.. - Change in required cash. Change in net operating working capital Capital expenditures... Unlevered free cash flow - Interest paid in cash + Interest tax shield .. - Preferred stock dividends. + Change in debt financing + Change in preferred stock financing Equity free cash flow ?-2 2-3 ?4 $2,385 1,212 7-15 7-16 -2,432 7-17 7-18 158 2-19 -400 140 $ 2,411 7-4 7-17 7-18 151 7-19 -1,300 380 Statement of Retained Earnings Beginning-of-year balance..... Net income.. Preferred stock dividends Common equity dividends End-of-year balance... $ 209 2,411 -60 -500 $2,060 7-5 2-6 7-7 7-8 $ 3,557 2-5 7-6 ?-7 7-8 7-20 7-20 $ 2,060 $ $ Balance Sheet Cash.... Net operating working capital. Property, plant, and equipment (net). Total assets 96 765 $ 98 781 107 429 12,199 $13,060 7-9 7-9 7-10 7-10 Debt Preferred stock. Equity... Total liabilities and equities... $ 9.000 1,000 3,060 $13,060 ?-11 ?-12 7-13 ?-14 7-11 ?-12 7-13 2-14 Exhibit may contain small rounding errors -1,200 $ 7,800 me before taxes. me tax expense.. income.. Inning retained earnings. Sends .... ing retained earnings. -5,880 $ 8,820 7,800 -4,000 $ 12,620 6,000 1.000 500 0 0 $ 7,800 $ 11,700 $ 20,000 0 Accounts payable-trade. Accrued liabilities (expenses) Interest payable Income taxes payable Dividends payable Total current liabilities. Long-term debt-A Long-term debt-B Long-term liabilities Total liabilities... Common stock at par. Additional paid-in capital Foreign currency translation adj. Retained earnings Treasury stock, at cost. Total shareholders' equity Total liabilities and equity $ 20,000 $ 31,700 $ 80,000 0 0 7,800 0 $ 87,800 $119,500 Working Backwards-Cash Flow Statement and Free Cash Flow Schedule-The Missing Data Company: We provide partially completed calculations for the income statements, balance sheets, retained carings, and free cash flows for the Missing Data Company in Exhibit P3.3. All of the cash flows occur at the end of each year, including capital expenditures and any financing transactions. The company distrib- utes all equity free cash flows to equityholders in the form of dividends in other words, it does not hold any excess cash. The interest rate it pays on debt is 7%, and its preferred stock dividend rate is 8% (of the company's book value of preferred stock). All cash flows occur at the end of each year. The tax rate is 25% on the first $4,000 of income and 45% on all income above $4,000. The company has no income taxes payable at the end of any of the three years. Complete the Missing Data Company's income statements, balance sheets, retained earnings, and free cash flow calculations for Years 0 and 1
