Question

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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.

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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jeff jeffy answered 2 years ago

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