Question

Use the information in the table below to construct an income statement for 2015 and balance sheets for 2014 and 2015.  Then, find Operating Cash Flow, change in Net Working Capital, Net Capital Spending, Cash Flow to Creditors, Cash Flow to Shareholders, and Free Cash Flow.  The tax rate is 34% and the plowback ratio is 60%.

	2014	2015
Sales		1700
Costs of Goods Sold		650
Depreciation Expense		200
Interest Expense		75
Total Fixed Assets	2200	3300
Accumulated Depreciation	400	Can be determined from the information provided
Total Current Assets	550	650
Total Current Liabilities	400	500
Long-term Debt	600	700
Common Stock	600	Can be determined from the information provided.

Answer 1

	2015
	$	$
Sales	1,700.00
Less: Cost of goods sold	(650.00)
Gross income		1,050.00
Less: Depreciation expenses		(200.00)
Less: Interest expenses		(75.00)
Net income		775.00
Less: Tax @ 34%		(263.50)
Net income after tax		511.50
Add: Depreciation expenses		200.00
Operating cash flow		711.50
	2,014.00	2,015.00
Current Assets	550.00	650.00
Less: Current Liabilities	(400.00)	(500.00)
Net working capital	150.00	150.00
changes in net working capital ( $ 150 - $ 150 )	-
Ending Fixed Assets for the year 2015	3,300.00
Less: Beginning Fixed Assets for the year 2015	(2,200.00)
Add: Depreciation expenses	200.00
Net Capital Spending	1,300.00
Interest expenses	75.00
Beginning Long Term Debt for the year 2015	600.00
Less: Ending Long term Debt	(700.00)
Cash flow to creditors	(25.00)
Plowback ratio	0.60
Dividend Payout ratio ( 1 - 0.6 )	0.40
Dividend paid ( $ 511.50 x 40% )	204.60
Common Stock at the beginning	600.00
Add: Net income after tax	511.50
Less: Dividend paid	(204.60)
Common stock at the end	906.90
Cash flow to shareholders ( Dividend paid )	204.60
Operating cash flow	711.50
Changes in working capital	-
Net Capital spending	1,300.00
Cash flow to creditors	(25.00)
Free Cash flow	1,986.50