WhiHaris 5HW

Free Cash Flows

Rhodes Corporations financial statements are shown below.

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

	2020			2019
Sales	$	12,000		$	10,000
Operating costs excluding depreciation		10,566			8,696
Depreciation and amortization		410			380
Earnings before interest and taxes	$	1,024		$	924
Less interest		160			100
Pre-tax income	$	864		$	824
Taxes (25%)		216			206
Net income available to common stockholders	$	648		$	618
Common dividends	$	205		$	200

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

	2020			2019
Assets
Cash	$	550		$	500
Short-term investments		210			200
Accounts receivable		2,750			2,500
Inventories		1,250			1,200
Total current assets	$	4,760		$	4,400
Net plant and equipment		3,850			3,500
Total assets	$	8,610		$	7,900
Liabilities and Equity
Accounts payable	$	1,100		$	1,000
Accruals		550			500
Notes payable		174			100
Total current liabilities	$	1,824		$	1,600
Long-term debt		1,100			1,000
Total liabilities	$	2,924			2,600
Common stock		4,143			4,200
Retained earnings		1,543			1,100
Total common equity	$	5,686		$	5,300
Total liabilities and equity	$	8,610		$	7,900

Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.

What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

$ million

What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

2020: $ million

2019: $ million

What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

2020: $ million

2019: $ million

What is the free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to the nearest whole number.

$ million

What is the ROIC for 2020? Round your answer to two decimal places.

%

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 answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

After-tax interest payment	$ million
Reduction (increase) in debt	$ million
Payment of dividends	$ million
Repurchase (Issue) stock	$ million
Purchase (Sale) of short-term investments	$ million