Question

Select financial information follows. Calculate Cash Flow from Assets.  Hint: In the process, you will need to calculate the amount of taxes that would appear on the income statement based on the information available to you.

Round your answer to 2 decimal places (example: if your answer is 546.345 you should enter 546.35).

Note: If your final answer is negative, be sure to enter a negative sign with your response.

		from Balance Sheet 12/31/2031	from Balance Sheet 12/31/2032		from Income Statement, Year ending 12/31/2032
	current assets	146	157		Depr. Expense	307
	net fixed assets	563	796		EBIT	1090
	current liabilities	185	177		Interest expense	103
					Taxes (at 30%)	?

Answer 1

Calculation of Amount of Taxes that would appear on income statement:

                A) EBIT-Interest = Taxable Income

                    1090-103 = 987

                B) Tax@30% on taxable income i.e, 987*30% =296.1

Cash Flow from Assets:

Cash Flow from assets = Operating Cash Flow – capital spending –Additions to Net Working Capital

A) Operating Cash Flow = EBIT + Depreciation – Taxes = 1090+307-296.1 =1100.9

B) Capital Spending = Ending Net Fixed Assets – Beginning Fixed Assets + Depreciation

                                      = 796-563+307 = 540

C) Additions to Net Working Capital = Ending Net Working Capital – Beginning Net Working Capital

Ending Net Working Capital = Ending Current Assets – Ending Current Liabilities = 157-177= -20

Beginning Net Working Capital = Beginning CA – Beginning CL = 146-185= -39

Additions to NWC = -20 –(-39) = -20+39 =19

Cash Flow from Assets = 1100.9 – 540 – 19 = 541.9