In: Finance
Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)
Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
Using Rhodes Corporation's financial statements (shown above), answer the following questions.
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Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) | |||
2016 | 2015 | ||
Sales | $ 10,800.00 | $ 9,000.00 | |
Operating costs excluding depreciation | $ 8,910.00 | $ 7,650.00 | |
Depreciation and amortization | $ 293.00 | $ 234.00 | |
Earnings before interest and taxes | $ 1,597.00 | $ 1,116.00 | |
Less Interest | $ 232.00 | $ 194.00 | |
Pre-tax income | $ 1,365.00 | $ 922.00 | |
Taxes (40%) | $ 546.00 | $ 368.80 | |
Net income available to common stockholders | $ 819.00 | $ 553.20 | |
Common dividends | $ 737.00 | $ 443.00 | |
Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) | |||
2016 | 2015 | ||
Assets | |||
Cash | $ 119.00 | $ 108.00 | |
Short-term investments | $ 54.00 | $ 45.00 | |
Accounts receivable | $ 1,386.00 | $ 1,260.00 | |
Inventories | $ 1,485.00 | $ 1,350.00 | |
Total current assets | $ 3,044.00 | $ 2,763.00 | |
Net plant and equipment | $ 2,925.00 | $ 2,340.00 | |
Total assets | $ 5,969.00 | $ 5,103.00 | |
Liabilities and Equity | |||
Accounts payable | $ 702.00 | $ 540.00 | |
Accruals | $ 693.00 | $ 630.00 | |
Notes payable | $ 216.00 | $ 180.00 | |
Total current liabilities | $ 1,611.00 | $ 1,350.00 | |
Long-term debt | $ 2,160.00 | $ 1,800.00 | |
Total liabilities | $ 3,771.00 | $ 3,150.00 | |
Common stock | $ 1,951.00 | $ 1,788.00 | |
Retained earnings | $ 247.00 | $ 165.00 | |
Total common equity | $ 2,198.00 | $ 1,953.00 | |
Total liabilities and equity | $ 5,969.00 | $ 5,103.00 | |
NOPAT: | |||
EBIT*(1-t)+Depreciation | $ 1,251.20 | $ 962.60 | |
NOWC = (Cash+Accounts receivable+Inventories)-(Accounts payable+Accruals) = | $ 1,595.00 | $ 1,548.00 | |
Total net operating capital = NOWC+Net plant and equipment | $ 4,520.00 | $ 3,888.00 | |
FCF = NOPAT-Change in NOWC = 1251.20-(4520-3888+293) = | $ 326.20 | ||
Use of FCF: | |||
After tax interest payment = 232*60% = | $ 139.20 | ||
Increase in debt = (1800+180)-(2160+216)- = | $ -396.00 | ||
Payment of dividends | $ 737.00 | ||
Issue of stock | $ -163.00 | ||
Purchase of short term investments | $ 9.00 | ||
Total use of FCF | $ 326.20 |