Question

2018				2017
Sales, ST Invest, Notes Pay, LT Debt factor increase	1.10			Sales	$7,000
Operating costs as % of sales	77.50%			Cash as % of sales	1.20%
Cash factor increase	1.15			Accts Rec as % of sales	11.00%
Accts. Rec factor increase	1.25			Inventory as % of sales	21.00%
Inventory factor increase	1.15			Net Plant & Equip as % of sales	28.00%
Net Plant & Equip factor increase	1.25			Accts Pay as % of sales	6.00%
Accts Pay factor increase	1.20			Accruals as % of Sales	6.00%
Accruals factor increase	1.15
				Operating cost as % of sales	85.00%
Depreciation as % of Net Plant & Equip	10.00%			Depreciation as % of Net Plant & Equip	10.00%
Interest rate	10.00%			Interest rate	10.00%
Tax rate	40.00%			Tax rate	40.00%
Payout rate	90.00%			Payout rate	80.00%
				Short-term investments as % of sales	0.50%
				Notes payable as % of sales	2.00%
				Long-term debt as % of sales	20.00%
				Retained earnings multiple factor	1.50
Income Statements:	2018		2017
Sales	$7,700.0		$7,000.0
Operating costs excluding depreciation	5,967.5		5,950.0
Depreciation and amortization	245.0		196.0
Earnings before interest and taxes	$1,487.5		$854.0
Less interest	165.6		150.5
Pre-tax income	$1,322.0		$703.5
Taxes	528.8		281.4
Net income available to common stockholders	$793.2		$422.1
Common dividends	$713.9		$337.7
Balance Sheets:	2018		2017
Assets
Cash	$96.6		$84.0
Short-term investments	38.5		35.0
Accounts receivable	962.5		770.0
Inventories	1,690.5		1,470.0
Total current assets	$2,788.1		$2,359.0
Net plant and equipment	2,450.0		1,960.0
Total assets	$5,238.1		$4,319.0
Liabilities and Equity
Accounts payable	$504.0		$420.0
Accruals	483.0		420.0
Notes payable	154.0		140.0
Total current liabilities	$1,141.0		$980.0
Long-term debt	1,540.0		1,400.0
Total liabilities	$2,681.0		$2,380.0
Common stock	2,351.2		1,812.4
Retained earnings	205.9		126.6
Total common equity	$2,557.1		$1,939.0
Total liabilities and equity	$5,238.1		$4,319.0

1. What is the net operating profit after taxes (NOPAT) for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place.

   $   million

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

   2018 $   million

   2017 $   million

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

   2018 $   million

   2017 $   million

4. What is the free cash flow for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place.

   $   million

5. What is the ROIC for 2018? Round your answer to one decimal places.

   %

6. 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 answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. 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 Formula = EBIT (1-Tax)

	2017	2018
EBIT	854	1,488
Tax Rate	40%	40%
NOPAT	512.4	893

b&c) We are not including short term investments and notes payable in the current operating assets and liabilities, respectively. Short term investments and notes payable are not the part of operating activities.

Assets	2018	2017
Cash	96.6	84.0
Accounts receivable	962.5	770.0
Inventories	1690.5	1470.0
Total operating current assets	2749.6	2324.0
Liabilities and Equity
Accounts payable	504.0	420.0
Accruals	483.0	420.0
Total current operating liabilities	987.0	840.0
Net operating working capital	1762.6	1484.0
Net plant and equipment	2450.0	1960.0
Net Operating Capital	4212.6	3444.0

d) FCFF Formula = NOPAT+D&A-CAPEX-Change in WC

Capex= 2,450-1960+245=735

Change in NWC= (2,788.1-1,141)-(2,359-980)=268.1

	2018
NOPAT	630.0
D&A	245.0
Less: Capex	735.0
Less: Change in NWC	268.1