Question

Sun Devil Inc. completed another successful year including a significant acquisition of Bear Down Co. For...

Sun Devil Inc. completed another successful year including a significant acquisition of Bear Down Co. For the past year, Sun Devil had operating income (OI) of $65 million and net financial expense (NFE) of $5 million during the year. During the year, Sun Devil acquired a competitor, Bear Down, for $200 million in an all equity transaction of newly issued shares. The resulting ending balance in Sun Devil’s common stock equity (CSE) was $450 million. With the acquisition of Bear Down and Sun Devil’s organic growth, net operating assets (NOA) ended the year at $625 million, representing an increase of $300 million from the beginning of the year. Additionally, Sun Devil had net financial borrowings (NFO) of $50 million during the year. During the year, Sun Devil did not do a stock buyback. However, Sun Devil paid $20 million in cash dividends as well as received $10 million from the exercise of employee stock options.

b.        What are free cash flows (FCF) for the year?

c.        What is the amount of common stock equity (CSE) as of the beginning of the year?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

b) Free cash flows for the year:

Free cash flow to the company= Net operating profit after tax - changes in NOA

Free cash flows = 65 million - 300 million = (- 235) million

In this case, we can see that SUN Devil is having a negetive free cash flow during the year but this does not mean anything bad with the companies performance since they have made some significant investments during the year.

c) Amount of common stock equity as of the begining of the year:

Equity at the end of the year = 450 million

Less - Equity issued for aquisition of Bear Down = 200 million

Less - Employee stock option plan during the year = 10 million

Hence amount of common stock at the begining = 240 million

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You have reformulated the Imber Aedax Company’s most recent financial statements and extracted the following information:...
You have reformulated the Imber Aedax Company’s most recent financial statements and extracted the following information: Year ended 31 Dec 2019 $ million Sales 35,200 Interest expense minus interest income 291 Earnings before tax 13,168 Tax expense 2,384 Comprehensive Income (CE) 11,809 As at 31 Dec 2019 $ million Net operating working capital (OWC) 936 Net non-current operating assets (NNCOA) 42,287 Net financial obligations (NFO) 11,906 a) Calculate NOA (net operating assets) and CSE (common shareholders’ equity) at the end...
Consolidation Working Paper One Year After Acquisition, Bargain Purchase (see re- lated P4.5) On January 1,...
Consolidation Working Paper One Year After Acquisition, Bargain Purchase (see re- lated P4.5) On January 1, 2019, Paxon Corporation acquired 90 percent of the outstanding com‑ mon stock of Saxon Company for $1,520 million cash. The fair value of the 10 percent noncontrolling interest in Saxon was estimated to be $180 million at the date of acquisition. Paxon uses the complete equity method to report its investment. The trial balances of Paxon and Saxon at December 31, 2019, appear below:...
Consolidation at the end of the first year subsequent to date of acquisition—Cost method (purchase price...
Consolidation at the end of the first year subsequent to date of acquisition—Cost method (purchase price equals book value) Assume that the parent company acquires its subsidiary on January 1, 2016, by exchanging 31,500 shares of its $1 par value Common Stock, with a market value on the acquisition date of $40 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of...
Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest , AAP and gain on upstream...
Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest , AAP and gain on upstream intercompany equipment sale A parent company acquired its 75% interest in its subsidiary on January 1, 2011. On the acquisition date, the total fair value of the controlling interest and the noncontrolling interest was $350,000 in excess of the book value of the subsidiary’s Stockholders’ Equity. All of that excess was allocated to a Royalty Agreement, which had a zero book value in the...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets         Current assets:            Cash   $21,000      Accounts receivable, net    250,000      Merchandise inventory    370,000      Prepaid expenses    12,000        Total current assets    653,000   Property and equipment, net    820,000        Total assets   $1,473,000        Liabilities and Stockholders' Equity         Liabilities:            Current liabilities   $260,000      Bonds payable, 11%    400,000        Total liabilities    660,000   Stockholders’ equity:            Common stock, $10 par value   $150,000      Retained earnings    663,000        Total stockholders’ equity    813,000        Total liabilities and equity   $1,473,000      Castile Products, Inc. Income Statement For the Year...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 24,000 Accounts receivable, net 250,000 Merchandise inventory 330,000 Prepaid expenses 9,000 Total current assets 613,000 Property and equipment, net 880,000 Total assets $ 1,493,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 280,000 Bonds payable, 11% 390,000 Total liabilities 670,000 Stockholders’ equity: Common stock, $5 per value $ 140,000 Retained earnings 683,000 Total stockholders’ equity 823,000 Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 21,000 Accounts receivable, net 260,000 Merchandise inventory 350,000 Prepaid expenses 10,000 Total current assets 641,000 Property and equipment, net 880,000 Total assets $ 1,521,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 200,000 Bonds payable, 8% 380,000 Total liabilities 580,000 Stockholders’ equity: Common stock, $10 per value $ 120,000 Retained earnings 821,000 Total stockholders’ equity 941,000 Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 23,000      Accounts receivable, net 190,000      Merchandise inventory 380,000      Prepaid expenses 12,000   Total current assets 605,000   Property and equipment, net 840,000   Total assets $ 1,445,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 220,000      Bonds payable, 10% 320,000   Total liabilities 540,000   Stockholders’ equity:      Common stock, $5 par value $ 140,000      Retained earnings 765,000   Total stockholders’ equity 905,000   Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 18,000      Accounts receivable, net 190,000      Merchandise inventory 310,000      Prepaid expenses 8,000   Total current assets 526,000   Property and equipment, net 890,000   Total assets $ 1,416,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 240,000      Bonds payable, 10% 330,000   Total liabilities 570,000   Stockholders’ equity:      Common stock, $5 par value $ 130,000      Retained earnings 716,000   Total stockholders’ equity 846,000   Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 22,000      Accounts receivable, net 220,000      Merchandise inventory 380,000      Prepaid expenses 10,000   Total current assets 632,000   Property and equipment, net 830,000   Total assets $ 1,462,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 230,000      Bonds payable, 8% 340,000   Total liabilities 570,000   Stockholders’ equity:      Common stock, $10 par value $ 150,000      Retained earnings 742,000   Total stockholders’ equity 892,000   Total liabilities...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT