Question

Free Cash Flows

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

	2018		2017
Sales	$3,300.0		$3,000.0
Operating costs excluding depreciation	2,558.0		2,550.0
Depreciation and amortization	73.0		63.0
Earnings before interest and taxes	$669.0		$387.0
Less Interest	71.0		65.0
Pre-tax income	$598.0		$322.0
Taxes (40%)	239.2		128.8
Net income available to common stockholders	$358.8		$193.2
Common dividends	$323.0		$155.0

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

	2018		2017
Assets
Cash	$49.0		$39.0
Short-term investments	17.0		15.0
Accounts receivable	396.0		360.0
Inventories	726.0		660.0
Total current assets	$1,188.0		$1,074.0
Net plant and equipment	725.0		630.0
Total assets	$1,913.0		$1,704.0
Liabilities and Equity
Accounts payable	$288.0		$240.0
Accruals	173.0		150.0
Notes payable	66.0		60.0
Total current liabilities	$527.0		$450.0
Long-term debt	660.0		600.0
Total liabilities	$1,187.0		$1,050.0
Common stock	633.2		597.0
Retained earnings	92.8		57.0
Total common equity	$726.0		$654.0
Total liabilities and equity	$1,913.0		$1,704.0

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

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. 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 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
   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 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
   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. Cash outflow, if any, should be indicated by a minus sign. Round your answer to one decimal place.
   $     million
   
5. What is the ROIC for 2018? Round your answer to two 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 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