Rhodes Corporation’s financial statements are shown below. Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2020 2019 Sales $ 11,000 $ 10,000 Operating costs excluding depreciation 9,516 8,650 Depreciation and amortization 440 390 Earnings before interest and taxes $ 1,044 $ 960 Less interest 160 100 Pre-tax income $ 884 $ 860 Taxes (25%) 221 215 Net income available to common stockholders $ 663 $ 645 Common dividends $ 205 $ 200 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2020 2019 Assets Cash $ 450 $ 400 Short-term investments 110 100 Accounts receivable 2,750 2,500 Inventories 1,450 1,200 Total current assets $ 4,760 $ 4,200 Net plant and equipment 3,850 3,500 Total assets $ 8,610 $ 7,700 Liabilities and Equity Accounts payable $ 900 $ 800 Accruals 450 400 Notes payable 372 200 Total current liabilities $ 1,722 $ 1,400 Long-term debt 900 800 Total liabilities $ 2,622 2,200 Common stock 4,430 4,400 Retained earnings 1,558 1,100 Total common equity $ 5,988 $ 5,500 Total liabilities and equity $ 8,610 $ 7,700 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

Rhodes Corporation’s financial statements are shown below. Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2020 2019 Sales $ 11,000 $ 10,000 Operating costs excluding depreciation 9,516 8,650 Depreciation and amortization 440 390 Earnings before interest and taxes $ 1,044 $ 960 Less interest 160 100 Pre-tax income $ 884 $ 860 Taxes (25%) 221 215 Net income available to common stockholders $ 663 $ 645 Common dividends $ 205 $ 200 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2020 2019 Assets Cash $ 450 $ 400 Short-term investments 110 100 Accounts receivable 2,750 2,500 Inventories 1,450 1,200 Total current assets $ 4,760 $ 4,200 Net plant and equipment 3,850 3,500 Total assets $ 8,610 $ 7,700 Liabilities and Equity Accounts payable $ 900 $ 800 Accruals 450 400 Notes payable 372 200 Total current liabilities $ 1,722 $ 1,400 Long-term debt 900 800 Total liabilities $ 2,622 2,200 Common stock 4,430 4,400 Retained earnings 1,558 1,100 Total common equity $ 5,988 $ 5,500 Total liabilities and equity $ 8,610 $ 7,700 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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Free Cash Flows

Rhodes Corporation’s financial statements are shown below.

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

	2020		2019
Sales	$	11,000		$	10,000
Operating costs excluding depreciation		9,516			8,650
Depreciation and amortization		440			390
Earnings before interest and taxes	$	1,044		$	960
Less interest		160			100
Pre-tax income	$	884		$	860
Taxes (25%)		221			215
Net income available to common stockholders	$	663		$	645
Common dividends	$	205		$	200

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

	2020		2019
Assets
Cash	$	450		$	400
Short-term investments		110			100
Accounts receivable		2,750			2,500
Inventories		1,450			1,200
Total current assets	$	4,760		$	4,200
Net plant and equipment		3,850			3,500
Total assets	$	8,610		$	7,700

Liabilities and Equity
Accounts payable	$	900		$	800
Accruals		450			400
Notes payable		372			200
Total current liabilities	$	1,722		$	1,400
Long-term debt		900			800
Total liabilities	$	2,622			2,200
Common stock		4,430			4,400
Retained earnings		1,558			1,100
Total common equity	$	5,988		$	5,500
Total liabilities and equity	$	8,610		$	7,700

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

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