Question

Financial information for Powell Panther Corporation is shown below: Powell Panther Corporation: Income Statements for Year...

Financial information for Powell Panther Corporation is shown below:

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

2016 2015
Sales $2,875.0 $2,300.0
Operating costs excluding depreciation and amortization 2,156.0 1,955.0
EBITDA $719.0 $345.0
Depreciation and amortization 74.0 64.0
Earnings before interest and taxes (EBIT) $645.0 $281.0
  Interest 63.0 51.0
Earnings before taxes (EBT) $582.0 $230.0
  Taxes (40%) 232.8 92.0
Net income
$349.2
$138.0
Common dividends
$314.0
$110.0

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

2016 2015
Assets
Cash and equivalents $28.0 $23.0
Accounts receivable 386.0 322.0
Inventories 568.0 437.0
  Total current assets $982.0 $782.0
Net plant and equipment 741.0 644.0
Total assets
$1,723.0
$1,426.0
Liabilities and Equity
Accounts payable $173.0 $138.0
Accruals 173.0 138.0
Notes payable 58.0 46.0
  Total current liabilities $404.0 $322.0
Long-term bonds 575.0 460.0
  Total liabilities $979.0 $782.0
Common stock 666.8 602.0
Retained earnings 77.2 42.0
  Common equity $744.0 $644.0
Total liabilities and equity
$1,723.0
$1,426.0

Write out your answers completely. For example, 25 million should be entered as 25,000,000.

What was net operating working capital for 2015 and 2016?

2015:  $   

2016:  $   

What was the 2016 free cash flow?

$   

How would you explain the large increase in 2016 dividends?

The large increase in free cash flow from 2015 to 2016 explains the large increase in 2016 dividends.

The large increase in net income from 2015 to 2016 explains the large increase in 2016 dividends.

The large increase in EBIT from 2015 to 2016 explains the large increase in 2016 dividends.

The large increase in sales from 2015 to 2016 explains the large increase in 2016 dividends.

The large increase in retained earnings from 2015 to 2016 explains the large increase in 2016 dividends.

Homework Answers

Answer #1

2015

2016

operating current assets

782

982

operating current liabilities

276

344

net operating working capital

506

638

Free cash flow 2016

net income

349.2

add depreciation and amortization

74

increase in accounts receivables

-64

increase in inventory

-200

increase in accounts payable

35

increase in accruals

35

increase in notes payable

12

cash flow from operating activities

241.2

free cash flow

operating cash flow-capital expenditure

241.2-171

70.2

CAPITAL EXPENDITURE = (year end plant balance+ depreciation)-previous year balance

(741+74)-644

171

The large increase in net income from 2015 to 2016 explains the large increase in 2016 dividends.

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