Question

In: Finance

2017 2018 Sales $2,900 $3,300 COGS 2,030 2,310 Interest 410 420 Dividends 56 79 Depreciation 290...

2017

2018

Sales

$2,900

$3,300

COGS

2,030

2,310

Interest

410

420

Dividends

56

79

Depreciation

290

330

Cash

250

150

Receivables

242

412

Current
liabilities

900

1,100

Inventory

1,015

900

Long-term debt

3,200

3,100

Net fixed assets

6,000

5,700

Tax rate

34%

34%

What is cash flow to stockholders for 2018?
A. $79
B. $189
C. $445
D. $524
E. $603

Why is the answer E? please explain.

Solutions

Expert Solution

Answer;

Option E $603

2018(Amount$)
Sales 3300
Cost of good sold 2310
EBIT & Depriciation

990

Depriciation 330
EBIT 660
Interest 420
EBT 240
TAX@34% 81.6
EAT 158.4

Cash Flow from working capital change

Cash increases Cash Decreases
Receivable 170
inventory 115
Current Libilities 200
Total 315 170

Net Cash inflow from working capital change = $315-$170 = $145

Cash Flow from Financial activity

(long term debt) = $3200 (2017) - $3100 (2018) = $100 cash outflow

Dividend paid = $79 cash outflow

Cash Flow from investing Activity(Net Fixed Assets) = $6000(2017) - ($5700+330)(2018) = $30 cash Outflow

Non Cash Item = $330 (Depriciation)

Total Cash flow for company = Net profit + non cash Item + Cash from working capital change + cash from investing + cash From financial + opening cash - closing cash

= $158.4 + $330 + $145 -$100- $79 -$30 +$250 - $150

=$524. 4 or $524

Total cash flow for stakeholders = company's cash flow + dividend

= $524 + $79

= $603

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