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FREE CASH FLOW Financial information for Powell Panther Corporation is shown here. Powell Panther Corporation income statement for year ending December 31 (Million of Dollars) 2018 2017 Sales $ 1,200.0 $ 1000.0 Operating costs excluding depreciation and amortization $ 1,020.0 850.0 EBITDA $ 180.0 $150.0 Depreciation and amortization 30.0 25.0 Earnings before interests and taxes (EBIT) $ 150.0 $ 125.0 interest 21.7 20.2 Earnings before taxes (EBT) $ 128.3 $ 104.3 Taxes (40%) 51.3 41.9 Net income $ 77.0 $ 62.9 Common dividends $ 60.5 $ 46.4 Powell Panther Corporation Balance sheets as of December 31 (Million of Dollars) 2018 2017 Assets Cash and equivalents $ 12.0 $ 10.0 Accounts receivable 180.0 150.0 Inventories 180.0 200.0 Total current assets $ 372.0 $ 360.0 Net plant and equipment 300.0 250.0 Total assets $ 672.0 $ 610.0 Liability and Equity Accounts payable $ 108.0 $ 90.0 Accrusis 72.0 60.0 Notes payable 67.0 51.5 Term current liabilities $ 247.0 $201.5 Long term bonds 150.0 1SO.D Total liabilities $ 397.0 $ 351.5 Common stock (50 million shares) 50.0 50.0 Retained earnings 225.0 208.5 Common equity $ 275.0 $ 258.5 Total liabilities and equity $ 672.0 $ 610.0 a. What was net operating working capital for 2017 and 2018? Assume the firm has no excess cash. b. What was the 2018 free cash flow? c. How would you explain the large increase in 2018 dividends?

BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

Solutions

Chapter
Section
Chapter 3, Problem 17P
Textbook Problem

FREE CASH FLOW Financial information for Powell Panther Corporation is shown here.

Powell Panther Corporation income statement for year ending December 31 (Million of Dollars)

  2018 2017
Sales $ 1,200.0 $ 1000.0
Operating costs excluding depreciation and amortization $ 1,020.0 850.0
EBITDA $ 180.0 $150.0
Depreciation and amortization 30.0 25.0
Earnings before interests and taxes (EBIT) $ 150.0 $ 125.0
interest 21.7 20.2
Earnings before taxes (EBT) $ 128.3 $ 104.3
Taxes (40%) 51.3 41.9
Net income $ 77.0 $ 62.9
Common dividends $ 60.5 $ 46.4

Powell Panther Corporation Balance sheets as of December 31 (Million of Dollars)

  2018 2017
Assets    
Cash and equivalents $ 12.0 $ 10.0
Accounts receivable 180.0 150.0
Inventories 180.0 200.0
Total current assets $ 372.0 $ 360.0
Net plant and equipment 300.0 250.0
Total assets $ 672.0 $ 610.0
Liability and Equity    
Accounts payable $ 108.0 $ 90.0
Accrusis 72.0 60.0
Notes payable 67.0 51.5
Term current liabilities $ 247.0 $201.5
Long term bonds 150.0 1SO.D
Total liabilities $ 397.0 $ 351.5
Common stock (50 million shares) 50.0 50.0
Retained earnings 225.0 208.5
Common equity $ 275.0 $ 258.5
Total liabilities and equity $ 672.0 $ 610.0
  1. a. What was net operating working capital for 2017 and 2018? Assume the firm has no excess cash.
  2. b. What was the 2018 free cash flow?
  3. c. How would you explain the large increase in 2018 dividends?

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