Problem 2-12 Free Cash Flows Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2016 2015 Sales $10,200.0 $8,500.0 Operating costs excluding depreciation 8,160.0 7,225.0 Depreciation and amortization 266.0 213.0 Earnings before interest and taxes $1,774.0 $1,062.0 Less Interest 219.0 183.0 Pre-tax income $1,555.0 $879.0 Taxes (40%) 622.0 351.6 Net income available to common stockholders $933.0 $527.4 Common dividends $840.0 $422.0 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2016 2015 Assets Cash $94.0 $85.0 Short-term investments 52.0 43.0 Accounts receivable 1,466.0 1,275.0 Inventories 1,683.0 1,530.0 Total current assets $3,295.0 $2,933.0 Net plant and equipment 2,656.0 2,125.0 Total assets $5,951.0 $5,058.0 Liabilities and Equity Accounts payable $842.0 $765.0 Accruals 850.0 680.0 Notes payable 204.0 170.0 Total current liabilities $1,896.0 $1,615.0 Long-term debt 2,040.0 1,700.0 Total liabilities $3,315.0 Common stock 1,764.0 1,585.0 Retained earnings 251.0 158.0 Total common equity $2,015.0 $1,743.0 Total liabilities and equity $5,951.0 $5,058.0 Using Rhodes Corporation's financial statements (shown above), answer the following questions. Using Rhodes Corporation's financial statements (shown above), answer the following questions. a. What is the net operating profit after taxes (NOPAT) for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place. million b. What are the amounts of net operating working capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place. 2016 $ million 2015 $ million c. What are the amounts of total net operating capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place. 2016 $ million 2015 $ million d. What is the free cash flow for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place. million e. What is the ROIC for 2016? Round your answer to two decimal places. f. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place. After-tax interest payment million Reduction (increase) in debt million Payment of dividends million Repurchase (Issue) stock million Purchase (Sale) of short-term million investments 66 Problem 2-12 Free Cash Flows Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2016 2015 Sales $10,200.0 $8,500.0 Operating costs excluding depreciation 8,160.0 7,225.0 Depreciation and amortization 266.0 213.0 Earnings before interest and taxes $1,774.0 $1,062.0 Less Interest 219.0 183.0 Pre-tax income $1,555.0 $879.0 Taxes (40%) 622.0 351.6 Net income available to common stockholders $933.0 $527.4 Common dividends $840.0 $422.0 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2016 2015 Assets Cash $94.0 $85.0 Short-term investments 52.0 43.0 Accounts receivable 1,466.0 1,275.0 Inventories 1,683.0 1,530.0 Total current assets $3,295.0 $2,933.0 Net plant and equipment 2,656.0 2,125.0 Total assets $5,951.0 $5,058.0 Liabilities and Equity Accounts payable $842.0 $765.0 Accruals 850.0 680.0 Notes payable 204.0 170.0 Total current liabilities $1,896.0 $1,615.0 Long-term debt 2,040.0 1,700.0 Total liabilities $3,315.0 Common stock 1,764.0 1,585.0 Retained earnings 251.0 158.0 Total common equity $2,015.0 $1,743.0 Total liabilities and equity $5,951.0 $5,058.0 Using Rhodes Corporation's financial statements (shown above), answer the following questions. Using Rhodes Corporation's financial statements (shown above), answer the following questions. a. What is the net operating profit after taxes (NOPAT) for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place. million b. What are the amounts of net operating working capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place. 2016 $ million 2015 $ million c. What are the amounts of total net operating capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place. 2016 $ million 2015 $ million d. What is the free cash flow for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place. million e. What is the ROIC for 2016? Round your answer to two decimal places. f. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place. After-tax interest payment million Reduction (increase) in debt million Payment of dividends million Repurchase (Issue) stock million Purchase (Sale) of short-term million investments 66
