Question

Using the information below to answer question (a) to (e).

The balance sheet and income statement shown below are for Rebel Inc. Note that the firm has no amortization charges and it does not lease any assets. Its tax rate is 35%.

Balance Sheet (Millions of $)	2014	2013
Assets
Cash and securities	$2,500	$2,000
Accounts receivable	11,500	$11,000
Inventories	16,000	15,500
Total current assets	$30,000	$28,500
Net plant and equipment	$20,000	$19,500
Total assets	$50,000	$48,000
Liabilities and Equity
Accounts payable	$9,500	$10,000
Accruals	5,500	4,000
Notes payable	7,000	5,000
Total current liabilities	$22,000	$19,000
Long-term bonds	$15,000	$17,000
Total liabilities	$37,000	$36,000
Common stock	$2,000	$2,000
Retained earnings	11,000	10,000
Total common equity	$13,000	$12,000
Total liabilities and equity	$50,000	$48,000

Income Statement (Millions of $)	2014
Net sales	$87,500
Operating costs except depreciation	81,813
Depreciation	1,531
Earnings bef interest and taxes (EBIT)	$4,156
Less interest	1,375
Earnings before taxes (EBT)	$2,781
Taxes (35%)	973
Net income	$1,808

a. What is Rebel’s free cash flow for 2014? (Assum that there is no excess cash.) (7 points)

NOWC₂₀₁₃ = ???Answer million

NOWC₂₀₁₄ = ???Answer million

The change in NOWC = ???Answer million

FCF₂₀₁₄ = ???Answer million

b. What is the firm’s 2014 EVA? Assume that its after-tax cost of capital is 5%? (4 points)

Total invested capital₂₀₁₄= ???Answer million

EVA = ???Answer million

Answer 1