Question

Free Cash Flows

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

	2018		2017
Sales	$3,750.0		$3,000.0
Operating costs excluding depreciation	2,813.0		2,550.0
Depreciation and amortization	94.0		78.0
Earnings before interest and taxes	$843.0		$372.0
Less Interest	81.0		65.0
Pre-tax income	$762.0		$307.0
Taxes (40%)	304.8		122.8
Net income available to common stockholders	$457.2		$184.2
Common dividends	$411.0		$147.0

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

	2018		2017
Assets
Cash	$38.0		$33.0
Short-term investments	19.0		15.0
Accounts receivable	432.0		360.0
Inventories	563.0		450.0
Total current assets	$1,052.0		$858.0
Net plant and equipment	936.0		780.0
Total assets	$1,988.0		$1,638.0
Liabilities and Equity
Accounts payable	$276.0		$240.0
Accruals	338.0		270.0
Notes payable	75.0		60.0
Total current liabilities	$689.0		$570.0
Long-term debt	750.0		600.0
Total liabilities	$1,439.0		$1,170.0
Common stock	446.8		412.0
Retained earnings	102.2		56.0
Total common equity	$549.0		$468.0
Total liabilities and equity	$1,988.0		$1,638.0

Using Rhodes Corporation's financial statements (shown above), answer the following questions.

1. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
   2018: $ ____ million
   2017: $ ___ million
2. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
   2018: $  ____ million
   2017: $ ____  million
3. What is the free cash flow for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to one decimal place.
   $  ____  million
4. What is the ROIC for 2018? Round your answer to two decimal places.
     ____%
   1. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.

      After-tax interest payment	$  ____ million
      Reduction (increase) in debt	$   ____ million
      Payment of dividends	$ ____  million
      Repurchase (Issue) stock	$  ____ million
      Purchase (Sale) of short-term investments	$  ____ million

Answer 1