The Oak Industries Problem:

Oak Industries had 2018 earnings before interest and taxes of 150 and a tax rate of 30%. Use the 2017 and 2018 year-end balance sheets below to determine Oak Industries 2018 free cash flow.

Oak Industries year-end balance sheets:

2017 2018

Assets:

Cash 10 10

Marketable Securities 37 6

Accounts receivable 200 220

Inventories 300 330

Net plant and equipment 800 870

Total Assets 1,347 1,436

Liabilities and Equity:

Accounts payable 60 89

Notes payable 20 9

Long-term bonds 555 586

Equity 712 752

Total Liabilities and Equity 1,347 1,436