Financial information for Powell Panther Corporation is shown below:Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 20182017Sales$3,900.0$3,000.0Operating costs excluding depreciation and amortization 2,925.0 2,550.0EBITDA$975.0$450.0Depreciation and amortization 90.0 69.0Earnings before interest and taxes (EBIT)$885.0$381.0  Interest 86.0 66.0Earnings before taxes (EBT)$799.0$315.0  Taxes (40%) 319.6 126.0Net income$479.4 $189.0 Common dividends$431.0 $151.0 Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars) 20182017AssetsCash and equivalents$38.0$30.0Accounts receivable 432.0 360.0Inventories 819.0 630.0  Total current assets$1,289.0$1,020.0Net plant and equipment 897.0 690.0Total assets$2,186.0$1,710.0Liabilities and EquityAccounts payable$207.0$180.0Accruals 173.0 150.0Notes payable 78.0 60.0  Total current liabilities$458.0$390.0Long-term bonds 780.0 600.0  Total liabilities$1,238.0$990.0Common stock 842.6 663.0Retained earnings 105.4 57.0  Common equity$948.0$720.0Total liabilities and equity$2,186.0 $1,710.0 Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest dollar, if necessary. Negative values, if any, should be indicated by a minus sign. What was net operating working capital for 2017 and 2018? Assume the firm has no excess cash.2017:  $  2018:  $  What was the 2018 free cash flow?$  How would you explain the large increase in 2018 dividends?The large increase in net income from 2017 to 2018 explains the large increase in 2018 dividends.The large increase in EBIT from 2017 to 2018 explains the large increase in 2018 dividends.The large increase in sales from 2017 to 2018 explains the large increase in 2018 dividends.The large increase in free cash flow from 2017 to 2018 explains the large increase in 2018 dividends.The large increase in retained earnings from 2017 to 2018 explains the large increase in 2018 dividends.

Question
Asked Sep 15, 2019
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Financial information for Powell Panther Corporation is shown below:

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

  2018 2017
Sales $ 3,900.0 $ 3,000.0
Operating costs excluding depreciation and amortization   2,925.0   2,550.0
EBITDA $ 975.0 $ 450.0
Depreciation and amortization   90.0   69.0
Earnings before interest and taxes (EBIT) $ 885.0 $ 381.0
  Interest   86.0   66.0
Earnings before taxes (EBT) $ 799.0 $ 315.0
  Taxes (40%)   319.6   126.0
Net income $
479.4
 
$
189.0
 
Common dividends $
431.0
 
$
151.0
 

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

  2018 2017
Assets
Cash and equivalents $ 38.0 $ 30.0
Accounts receivable   432.0   360.0
Inventories   819.0   630.0
  Total current assets $ 1,289.0 $ 1,020.0
Net plant and equipment   897.0   690.0
Total assets $ 2,186.0 $ 1,710.0
Liabilities and Equity
Accounts payable $ 207.0 $ 180.0
Accruals   173.0   150.0
Notes payable   78.0   60.0
  Total current liabilities $ 458.0 $ 390.0
Long-term bonds   780.0   600.0
  Total liabilities $ 1,238.0 $ 990.0
Common stock   842.6   663.0
Retained earnings   105.4   57.0
  Common equity $ 948.0 $ 720.0
Total liabilities and equity $
2,186.0
 
$
1,710.0
 

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest dollar, if necessary. Negative values, if any, should be indicated by a minus sign.

 

  1. What was net operating working capital for 2017 and 2018? Assume the firm has no excess cash.

    2017:  $  

    2018:  $  

  2. What was the 2018 free cash flow?

    $  

  3. How would you explain the large increase in 2018 dividends?

    1. The large increase in net income from 2017 to 2018 explains the large increase in 2018 dividends.
    2. The large increase in EBIT from 2017 to 2018 explains the large increase in 2018 dividends.
    3. The large increase in sales from 2017 to 2018 explains the large increase in 2018 dividends.
    4. The large increase in free cash flow from 2017 to 2018 explains the large increase in 2018 dividends.
    5. The large increase in retained earnings from 2017 to 2018 explains the large increase in 2018 dividends.
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Expert Answer

Step 1

1.

Calculate the net operating capital as follows:

Total current assetsp7
Net operating capital2017
Total current liabilities 2017,
=S1,020-$390
$630
Total current assets 01s
Total current liabilities1018
Net operating capital,018
=S1,289-$458
$831
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Image Transcriptionclose

Total current assetsp7 Net operating capital2017 Total current liabilities 2017, =S1,020-$390 $630 Total current assets 01s Total current liabilities1018 Net operating capital,018 =S1,289-$458 $831

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Step 2

2.

Calculate the increase in net working capital as follows:

(Net operating capital201s
Increase in net working capital
Net operating capital017
= $831-$630
$201
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Image Transcriptionclose

(Net operating capital201s Increase in net working capital Net operating capital017 = $831-$630 $201

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Step 3

Calculate the capital expe...

Net Plant and equipment01s'
Capital Expenditure =Net Plant and equipment017
2018
+Depreciation
($897-$690)+S90
$297
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Net Plant and equipment01s' Capital Expenditure =Net Plant and equipment017 2018 +Depreciation ($897-$690)+S90 $297

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