Question

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2015 2014 Sales $10,400.0 $8,000.0 Operating costs excluding depreciation 7,800.0 6,800.0 Depreciation and amortization 230.0 200.0 Earnings before interest and taxes $2,370.0 $1,000.0 Less: Interest 224.0 172.0 Pre-tax income $2,146.0 $828.0 Taxes (40%) 858.4 331.2 Net income available to common stockholders $1,287.6 $496.8 Common dividends $1,159.0 $397.0 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2015 2014 Assets Cash $132.0 $120.0 Short-term investments 52.0 40.0 Accounts receivable 1,440.0 1,200.0 Inventories 2,300.0 1,840.0 Total current assets $3,924.0 $3,200.0 Net plant and equipment 2,300.0 2,000.0 Total assets $6,224.0 $5,200.0 Liabilities and Equity Accounts payable $800.0 $640.0 Accruals 300.0 240.0 Notes payable 208.0 160.0 Total current liabilities $1,308.0 $1,040.0 Long-term bonds 2,080.0 1,600.0 Total liabilities $3,388.0 $2,640.0 Common stock 2,557.4 2,410.0 Retained earnings 278.6 150.0 Total common equity $2,836.0 $2,560.0 Total liabilities and equity $6,224.0 $5,200.0

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

Rhodes corporation income statements for year ending 31^st December - Given Information

Particulars	2015 (in millions)	2014 (in millions)
Sales	$10400	$8000
Operating cost	$7800	$6800
Depreciation	$230	$200
EBIT	$2370	$1000
(-)Interest	$224	$172
EBT	$2146	$828
(-)Tax @40%	$858.4	$331.2
Net income	$1287.6	$496.8
Dividends	$1159	$397

Net operating profit after taxes (NOPAT) 2015 –

NOPAT = Operating income*(1-tax rate)

Particulars	Amount (in millions)
Sales	$10400
(-)operating cost	$7800
Operating income	$2600
(-)Interest expense	$224
(-)Tax @40%	$950.4
NOPAT	$1425.6

Net Operating working capital –

NOWC = Current operating assets – Current operating liabilities

Current operating assets = Cash+Accounts receivable+Inventory

Current operating liabilities = Accounts payable + Accrued expenses

NOWC 2015 –

NOWC = (132+1440+2300) – (800+300)

              = $2772

NOWC 2014 –

NOWC = (120+1200+1840) – (640+240)

           = $2280

Net Operating capital –

Net operating capital = net operating working capital + non current operating assets

Net Operating capital 2015 –

Net Operating capital = 2772 + 2300

                                       = $5072

Net Operating capital 2014 –

Net Operating capital = 2280 + 2000

                                     = $4280

Free Cash Flow 2015 –

Net income + Depreciation +Amortization + Non cash income – Net working capital

Net working capital = current assets – current liabilities

(1287.6+230) – (3924 – 1308)

($1098.4)

Return on invested capital (ROIC) 2015 –

Net income – Dividends/Total cpital

1287.6 – 1159/6224

2.06%

The rest of the information in the question is not given clearly.