Question

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

	2016		2015
Sales	$7,150.0		$6,500.0
Operating costs excluding depreciation	5,541.0		5,525.0
Depreciation and amortization	245.0		189.0
Earnings before interest and taxes	$1,364.0		$786.0
Less Interest	154.0		140.0
Pre-tax income	$1,210.0		$646.0
Taxes (40%)	484.0		258.4
Net income available to common stockholders	$726.0		$387.6
Common dividends	$653.0		$310.0

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

	2016		2015
Assets
Cash	$94.0		$85.0
Short-term investments	36.0		33.0
Accounts receivable	813.0		650.0
Inventories	1,170.0		975.0
Total current assets	$2,113.0		$1,743.0
Net plant and equipment	2,451.0		1,885.0
Total assets	$4,564.0		$3,628.0
Liabilities and Equity
Accounts payable	$569.0		$455.0
Accruals	286.0		260.0
Notes payable	143.0		130.0
Total current liabilities	$998.0		$845.0
Long-term debt	1,430.0		1,300.0
Total liabilities	$2,428.0		$2,145.0
Common stock	1,947.0		1,367.0
Retained earnings	189.0		116.0
Total common equity	$2,136.0		$1,483.0
Total liabilities and equity	$4,564.0		$3,628.0

Using Rhodes Corporation's financial statements (shown above), answer the following questions.

What is the net operating profit after taxes (NOPAT) for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
$   million

What are the amounts of net operating working capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
2016 $   million
2015 $   million

What are the amounts of total net operating capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
2016 $   million
2015 $   million

What is the free cash flow for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
$   million

What is the ROIC for 2016? 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 answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.

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

Answer 1

Net operating profit = Operating income*( 1-tax rate)

a.) NOPAT for 2016= 1364*(1-.4)= $818.4

b.) Net operating working capitol is calculated as Current assets-current liabilities

Year 2015:

Net operating working capitol= 1743- 845= $ 898

Year 2016:

Net operating working capitol= 2113-998= $1115

c.) Total net operating capitol= Net operating working capitol + non current operating assets

Year 2015 = 898+1885=$2783

Year 2016 = 1118+2451=$3569

d.) Free cash flow for 2016= EBIT*(1-tax rate)+Non cash expense(Depreciation, amortization etc)-change in working capitol- capitol expenditure

= 1364*(1-.4)[phone]= 818.4+245-217-2451= $-1604.6

e.) Invested capitol= Working capitol - cash + Fixed assets

= 1115-94+2451= $3472

ROIC = NOPAT/ Invested capitol= 818.4/ 3472= 23.57%