PLEASE SHOW FREE CASH FLOW (FCF's) FOR D'LEON Inc. part 1 and 2

Balance Sheets TA 2016 2015 Assets Cash 7,282 57,600 Accounts receivable 632,160 351,200 Inventories 1,287,360 715,200 $1,124,000 Total current assets $1,926,802 Gross fixed assets 491,000 1,202,950 Less accumulated depreciation 146,200 263,160 S 939,790 $ 344,800 Net fixed assets Total assets $2,866,592 $1,468,800 Liabilities and Equity Accounts payable $ 145,600 524,160 Accruals 489,600 136,000 Notes payable 636,808 200,000 $ 481,600 $1,650,568 Total current liabilities Long-term debt Common stock (100,000 shares) 723432 323,432 460,000 460,000 Retained earnings Total equity 32,592 $ 492,592 203,768 $ 663,768 otal liabilities and equity $2,866,592 $1,468,800 TABLE IC 3.2 Income Statements 2016 2015 Sales $6,034,000 $3,432,000 Cost of goods sold 5,528,000 2,864,000 Other expenses Total operating costs excluding depreciation and amortization Depreciation and amortization 519,988 $6,047,988 358,672 $3,222,672 116,960 ($ 130,948) 18,900 EBIT $ 190,428 43,828 $ 146,600 Interest expense 136,012 (S 266,960) EBT Taxes (40%) (106,784) ($ 160,176) 58,640 Net income $ 87,960 EPS ($ 1.602) 0.880 DPS 0.110 $ 0.220 Book value per share 4.926 6.638 Stock price $ 2.25 8.50 Shares outstanding 100,000 100,000 Tax rate 40.00% 40.00% Lease payments $ 40,000 $ 40,000 Sinking fund payments 0 aThe firm had sufficient taxable income in 2014 and 2015 to obtain its full tax refund in 2016. IC 3.3 Statement of Stockholders' Equity, 2016 Common Stock Retained Total Stockholders Equity Shares Amount Earnings Balances, December 31, 2015 100,000 $460,000 $203,768 $ 663,768 2016 Net income (160,176) Cash dividends (11,000) (171,176) $ 492,592 Addition (subtraction) to retained earnings Balances, December 31, 2016 100,000 $460,000 $ 32,592 Chapter 3 Financial Statements, Cash Flow, and Taxes Statement of Cash Flows, 2016 TABLE IC 3.4 Operating Activities ($ 160,176) Net income Depreciation and amortization Increase in accounts payable 116,960 378,560 353,600 Increase in accruals (280,960) Increase in accounts receivable (572,160) ($164,176) Increase in inventories Net cash provided by operating activities Long-Term Investing Activities Additions to property, plant, and equipment Net cash used in investing activities (S 711,950) (S 711,950) Financing Activities Increase in notes payable Increase in long-term debt Payment of cash dividends Net cash provided by financing activities $ 436,808 400,000 (11,000) 825,808 Summary Net decrease in cash (S 50,318) 57,600 Cash at beginning of year Cash at end of year 7,282 99 Balance Sheets TABLE IC 2016 2015 2017E Assets 57,600 7,282 Cash S 85,632 351,200 632,160 Accounts receivable 878,000 715,200 1,287,360 Inventories 1,716,480 $1,124,000 $1,926,802 $2,680,112 Total current assets 491,000 1,197,160 1,202,950 Gross fixed assets 146,200 263,160 Less accumulated depreciation 380,120 $ 344,800 $817,040 939,790 Net fixed assets $1,468,800 $2,866,592 Total assets $3,497,152 Liabilities and Equity $ 145,600 $ 436,800 524,160 Accounts payable 136,000 489,600 Accruals 408,000 200,000 Notes payable 636,808 300,000 481,600 $1,650,568 $1,144,800 Total current liabilities 323,432 723,432 400,000 Long-term debt 460,000 460,000 1,721,176 Common stock 203,768 32,592 Retained earnings 231,176 $1,952,352 $ 663,768 492,592 Total equity $3,497,152 $2,866,592 $1,468,800 Total liabilities and equity Note: E indicates estimated. The 2017 data are forecasts Income Statements E IC 4.2 2017E 2016 2015 $7,035,600 $6,034,000 $3,432,000 2,864,000 Sales 5,875,992 5,528,000 Cost of goods sold Other expenses 519,988 550,000 358,672 Total operating costs excluding depreciation and amortization $ 6,047,988 13,988) 209,328 $6,425,992 s 609,608 (S $3,222,672 EBITDA Depreciation & amortization 116,960 492,648 116,960 (S 130,948) $ 190428 136,012 (S 266,960) S146,600 (106,784) (S 160,176) 18,900 EBIT Interest expense 70,008 $ 422,640 43,828 EBT Taxes (40 %) 169,056 58,640 $ 253,584 Net income S 87,960 $1.014 ($ 1.602) EPS $ 0.880 S 0.220 $ 7.809 $ 0.110 $ 4.926 $ 0.220 $ 6638 DPS Book value per share $ 12.17 $ 2.25 Stock price Shares outstanding $ 8.50 100,000 250,000 100,000 Tax rate 40.00% 40.00% 40.00% $40,000 Lease payments Sinking fund payments $40,000 $40,000 0 0 0 Note: E indicates estimated. The 2017 data are forecasts. The firm had sufficient taxable income in 2014 and 2015 to obtain its full tax refund in 2016. Ratio Analysis .3 Industry Average 2016 2015 2017E 2.3x 2.7x 1.2x Current 0.8x 1.0x 0.4x Quick 4.8x 6.1x 4.7x Inventory turnover Days sales outstanding (DSO) 32.0 37.4 38.2 7.0x 10.0x 6.4x Fixed assets turnover 2.6x 2.3x 2.1x Total assets turnover 40.0% 73.4% 44.1% Debt-to-capital ratio 6.2x -1.0x 4.3x TIE 7.3% -2.2 % 5.5% Operating margin Profit margin Basic earning power 3.5% -2.7 % 2.6% 19.1% 13.0% -4.6% 9.1% 6.0% -5.6% ROA 18.2% 13.3% -32.5% ROE 14.5% 9.6% -4.2 % ROIC 14.2x 9.7 x -1.4x Price/earnings Market/book 2.4x 1.3x 0.5x $6.64 n.a. $4.93 Book value per share Note: E indicates estimated. The 2017 data are forecasts. Calculation is based on a 365-day year