Question

Finding operating and free cash flows   Consider the balance sheets and selected data from the income statement of Keith Corporation that follow

Keith Corporation Balance Sheets

Assets	2019	2018
Cash	$1,500	$1,000
Marketable securities	1800	1200
Accounts receivable	2000	1800
Inventories	2900	2800
Total current assets	$8,200	$6,800
Gross fixed assets	$29,500	$28,100
Less: Accumulated depreciation	14700	13100
Net fixed assets	$14,800	$15,000
Total assets	$23,000	$21,800
Liabilities and Stockholders' Equity
Accounts payable	$1,600	$1,500
Notes payable	2800	2200
Accruals	200	300
Total current liabilities	$4,600	$4,000
Long-term debt	$5,000	$5,000
Common stock	$10,000	$10,000
Retained earnings	3400	2800
Total stockholders' equity	$13,400	$12,800
Total liabilities and stockholders' equity	$23,000	$21,800

Income Statement Data

​(20192019​)

Depreciation expense	$1,600
Earnings before interest and taxes (EBIT)	2700
Interest expense	367
Net profits after taxes	1400
Tax rate	21%

. a. Calculate the​ firm's net operating profit after taxes​ (NOPAT) for the year ended December​ 31, 20192019.

b. Calculate the​ firm's operating cash flow​ (OCF) for the year ended December​ 31, 20192019.

c. Calculate the​ firm's free cash flow​ (FCF) for the year ended December​ 31, 20192019.

d.​ Interpret, compare and contrast your cash flow estimate in parts​ (b) and​ (c). a. The net operating profit after taxes is ​$nothing. ​(Round to the nearest​ dollar.)

Answer 1