Pamplin, Inc. 2-5A. (Measuring cash flows) Calculate the free cash flows for Pamplin, Inc., for the year ended December 31, 2003, both from an asset and a financing perspective. Interpret your results. Free cash flows from an operating perspective: Operating income (EBIT) Depreciation EBITDA Tax expense Less change in tax payable Cash taxes After-tax cash flows from operations Pamplin, Inc., Balance Sheet at 12/31/02 and 12/31/03 ASSETS 2002 Change in net working capital Change in current assets: Change in cash Change in accounts receivable Change in inventory Change in current assets Cash Accounts receivable Inventory Current assets Plant and equipment Less: accumulated depreciation Net plant and equipment Total assets $ 200 450 550 1,200 2,200 (1,000) 1,200 $2,400 2003 $ 150 425 625 1,200 2,600 (1,200) 1,400 $2,600 LIABILITIES AND OWNERS' EQUITY 2003 Change in noninterest-bearing current debt: Change in accounts payable Change in net operating working capital LIABILITIES AND OWNERS' EQUITY 2002 Accounts payable $ 200 Notes payable-current (9%) 0 Current liabilities $ 200 Long-term debt 600 Owners' equity Common stock $ 300 Paid-in capital 600 Retained earnings 700 Total owners' equity $1,600 Total liabilities and owners' equity $2,400 $ 150 150 $ 300 600 Change in long-term assets: Purchase of fixed assets Free cash flows - operating perspective $ 300 600 800 $1,700 $2,600 Pamplin, Inc. Income Statement for years ending 12/31/02 and 12/31/03 ($ in thousands) Free cash flows from a financing perspective: Interest expense Less change in interest payable Interest paid to lenders Repayment of long-term debt Increase in short-term debt Common Stock dividends paid to owners Free cash flows - financing perspective: 2002 *compute Sales Cost of goods sold Gross profit Operating expenses $1,200 700 $ 500 30 2003 $1,450 850 $ 600 40 1.000 Total liabilities and owners' equity $2,400 $1,700 $2,600 Free cash flows from a financing perspective: Interest expense Less change in interest payable Interest paid to lenders Repayment of long-term debt Increase in short-term debt Common Stock dividends paid to owners Free cash flows - financing perspective: 2003 * compute Pamplin, Inc. Income Statement for years ending 12/31/02 and 12/31/03 ($ in thousands) 2002 Sales $1,200 Cost of goods sold 700 Gross profit $ 500 Operating expenses 30 220 Net operating income $ 250 Interest expense 50 50 Net income before taxes $ 200 Taxes (40%) 80 Net income $ 120 $1,450 850 $ 600 Depreciation 200 $360 Total Cash Inflow Cotal Cash Outflow (should equal Inflow) $ 300 120 $ 180