Question

Free Cash Flows

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

	2016		2015
Sales	$10,400.0		$8,000.0
Operating costs excluding depreciation	8,320.0		6,800.0
Depreciation and amortization	264.0		240.0
Earnings before interest and taxes	$1,816.0		$960.0
Less: Interest	224.0		172.0
Pre-tax income	$1,592.0		$788.0
Taxes (40%)	636.8		315.2
Net income available to common stockholders	$955.2		$472.8
Common dividends	$860.0		$378.0

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

	2016		2015
Assets
Cash	$140.0		$112.0
Short-term investments	52.0		40.0
Accounts receivable	1,232.0		1,120.0
Inventories	1,632.0		1,360.0
Total current assets	$3,056.0		$2,632.0
Net plant and equipment	2,640.0		2,400.0
Total assets	$5,696.0		$5,032.0
Liabilities and Equity
Accounts payable	$1,040.0		$800.0
Accruals	828.0		720.0
Notes payable	208.0		160.0
Total current liabilities	$2,076.0		$1,680.0
Long-term bonds	2,080.0		1,600.0
Total liabilities	$4,156.0		$3,280.0
Common stock	1,302.8		1,610.0
Retained earnings	237.2		142.0
Total common equity	$1,540.0		$1,752.0
Total liabilities and equity	$5,696.0		$5,032.0

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

a. NOPAT = EBIT*(1-tax rate)

NOPAT for 2016 = 1816*(1-0.4) = 1089.60 Million

NOPAT for 2015 = 960*(1-0.4) = 576 Million

b. Net operating working capital = current assets - current liabilities

NWC for 2016 = 3056-2076 =980

NWC for 2015 = 2632-1680 = 952

c. Net operating capital = net operating working capital + fixed assets

Net operating capital for 2016 = 980+2640 = 3,620

Net operating capital for 2015 = 952+ 2400 = 3,352

d. Free cash flow 2016 = Net Income + Depreciation - Increase in WC - Capital expenditure

Free cash flow 2-16 = 955.2 + 264 - 28 - 240 = 951.2 Million

e. ROIC = NOPAT/Invested capital =1089.60/5,696 = 0.1213 = 19.13%

Note: We have answered 5 sun-parts. Only 4 sub-parts will be answered at a time. Kindly post others seperately.