Business, 19.02.2020 23:27 johngayden46
P4-6: Finding operating and free cash flows: Consider the following balance sheets and selected data from the income statement of Keith Corporation.
December 31
Assets
2019
2018
Cash
$ 1,500
$ 1,000
Marketable securities
1,800
1,200
Accounts receivable
2,000
1,800
Inventories
2,900
2,800
Total current assets
$ 8,200
$ 6,800
Gross fixed assets
$29,500
$28,100
Less: Accumulated depreciation
14,700
13,100
Net fixed assets
$14,800
$15,000
Total assets
$23,000
$21,800
Liabilities and stockholders' equity
Accounts payable
$ 1,600
$ 1,500
Notes payable
2,800
2,200
Accruals
200
300
Total current liabilities
$ 4,600
$ 4,000
Long-term debt
5,000
5,000
Total liabilities
$ 9,600
$ 9,000
Common stock
$10,000
$10,000
Retained earnings
3,400
2,800
Total stockholders’ equity
$13,400
$12,800
Total liabilities and stockholders’ equity
$23,000
$21,800
Keith Corporation Balance Sheets
Depreciation expense
$1,600
Earnings before interest and taxes (EBIT)
2,700
Interest expense
367
Net profits after taxes
1,400
Tax rate
21%
Keith Corporation Income Statement Data (2019)
Calculate the firm’s net operating profit after taxes (NOPAT) for the year ended December 31, 2019, using Equation 4.1. NOPAT=EBIT×(1 − T )
Calculate the firm’s operating cash flow (OCF) for the year ended December 31, 2019, using Equation 4.3. OCF = [EBIT×(1 − T )] + Depreciation
Calculate the firm’s free cash flow (FCF) for the year ended December 31, 2019, using Equation 4.4. FCF = OCF − Net fixed asset investment (NFAI) − Net current asset investment (NCAI)
Interpret, compare, and contrast your cash flow estimates in parts b and c.
Answers: 3
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P4-6: Finding operating and free cash flows: Consider the following balance sheets and selected data...
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