Question

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

	2015		2014
Sales	$10,200.0		$8,500.0
Operating costs excluding depreciation	7,905.0		7,225.0
Depreciation and amortization	253.0		230.0
Earnings before interest and taxes	$2,042.0		$1,045.0
Less: Interest	219.0		183.0
Pre-tax income	$1,823.0		$862.0
Taxes (40%)	729.2		344.8
Net income available to common stockholders	$1,093.8		$517.2
Common dividends	$984.0		$414.0

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

	2015		2014
Assets
Cash	$154.0		$128.0
Short-term investments	52.0		43.0
Accounts receivable	1,530.0		1,275.0
Inventories	1,870.0		1,700.0
Total current assets	$3,606.0		$3,146.0
Net plant and equipment	2,525.0		2,295.0
Total assets	$6,131.0		$5,441.0
Liabilities and Equity
Accounts payable	$748.0		$680.0
Accruals	880.0		765.0
Notes payable	204.0		170.0
Total current liabilities	$1,832.0		$1,615.0
Long-term bonds	2,040.0		1,700.0
Total liabilities	$3,872.0		$3,315.0
Common stock	1,994.2		1,971.0
Retained earnings	264.8		155.0
Total common equity	$2,259.0		$2,126.0
Total liabilities and equity	$6,131.0		$5,441.0

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

What is the net operating profit after taxes (NOPAT) for 2015? 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.
2015 $ .... million
2014 $ .... 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.
2015 $ ..... million
2014 $ ..... million

What is the free cash flow for 2015? 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 2015? 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 proft after taxes = Earnings before interest and tax*(1-tax rate)

=2042*(1-0.40) = $1225.20 million

	2014		2015
Operating Current assets	128+1275+1870	3273	154+1530+1870	3554
Operating Current Liabilities	680+765	1445	748+880	1628
Net Operating working capital		1828		1926
Net operating capital = Net operating working capital + Net fixed assets
	2014		2015
Net Operating working capital		1828		1926
Net Fixed Assets		2295		2525
Net operating capital		4123		4451
Free cash flow = Net operating profit after taxes - Net investment in operating capital
2015
Net Investment in operating capital = Operating capital 2015 - Operating capital 2014
	4451-4123
	328
	$328 million
	1225.20-328
	897.2
	$897.20 million
ROIC = Net operating profit after taxes/Total net operating capital
1225.20/4451	27.53%

	2015
After-tax interest payment	131.4	219*(1-0.40)
Reduction (increase) in debt	340	2040-1700
Payment of dividends	984
Repurchase (Issue) stock	133	2259-2126
Purchase (Sale) of short-term investments	9	52-43