Question

shown in thousands

	2015	2014
Cash	$102,850	$89,725
Accounts Receivable	103,365	85,527
Inventories	38,444	34,982
Total Current Assets	$244,659	$210,234
Net Fixed Assets	67,165	42,436
Total Assets	311,824	$252,670
Accounts Payable	$30,761	$23,109
Accruals	30,477	22,656
Notes Payable	16,717	14,217
Total current liabilities	$77,955	$59,982
Long-term debt	76,264	63,914
Total Liabilities	$154,219	$123,896
Common Stock	100,000	90,000
Retained Earnings	57,605	38,744
Total Common Equity	$157,605	$128,774
Total Liabilities and Equity	$311,824	$252,670

Sales for 2015 were $455,150,000, and EBITDA was 35% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40% and Laiho pays 40% of its net income as dividends.

1. Find Free Cash Flow for Laiho for 2015

Answer 1

Calculation of Free Cash flow to Laiho for 2015:

Free Cash flow = Cash flow from Operations – CapEx

= $150,779,898 – $32,117.15

= $150,747,780.85

Working note:

(1) Net Income:

Sales	455,150,000.00
EBITDA	159,302,500.00
Depreciation and amortization (11% of 67165)	7,388.15
Interest	8,575,000.00
Net Income	150,720,111.85

(2) Non cash expenses is depreciation = $7,388.15

(3) Increase in Net working capital = (Current Assets of 2015 – Current Assets of 2014) + (Current Liabilities of 2015 – Current Liabilities of 2014)

= (244659-210234)+(77955-59982)

= 34425+17973

= $52398

(4) Cash flow from Operations = Net income + non cash expenses – increase in net working capital

= $150,720,111.85+$7,388.15+$52,398

= $150,779,898

(5) CapEx = Net Fixed assets of 2015 - Net Fixed assets of 2014 + Depreciation & Amortization

= $67,165-$42,436+$7,388.15

= $32,117.15