Business, 19.02.2020 23:27 johngayden46

P4-6: Finding operating and free cash flows: Consider the following balance sheets and selected data from the income statement of Keith Corporation.

December 31

Assets

2019

2018

Cash

$ 1,500

$ 1,000

Marketable securities

1,800

1,200

Accounts receivable

2,000

1,800

Inventories

2,900

2,800

Total current assets

$ 8,200

$ 6,800

Gross fixed assets

$29,500

$28,100

Less: Accumulated depreciation

14,700

13,100

Net fixed assets

$14,800

$15,000

Total assets

$23,000

$21,800

Liabilities and stockholders' equity

Accounts payable

$ 1,600

$ 1,500

Notes payable

2,800

2,200

Accruals

200

300

Total current liabilities

$ 4,600

$ 4,000

Long-term debt

5,000

5,000

Total liabilities

$ 9,600

$ 9,000

Common stock

$10,000

$10,000

Retained earnings

3,400

2,800

Total stockholders’ equity

$13,400

$12,800

Total liabilities and stockholders’ equity

$23,000

$21,800

Keith Corporation Balance Sheets

Depreciation expense

$1,600

Earnings before interest and taxes (EBIT)

2,700

Interest expense

367

Net profits after taxes

1,400

Tax rate

21%

Keith Corporation Income Statement Data (2019)

Calculate the firm’s net operating profit after taxes (NOPAT) for the year ended December 31, 2019, using Equation 4.1. NOPAT=EBIT×(1 − T )
Calculate the firm’s operating cash flow (OCF) for the year ended December 31, 2019, using Equation 4.3. OCF = [EBIT×(1 − T )] + Depreciation
Calculate the firm’s free cash flow (FCF) for the year ended December 31, 2019, using Equation 4.4. FCF = OCF − Net fixed asset investment (NFAI) − Net current asset investment (NCAI)
Interpret, compare, and contrast your cash flow estimates in parts b and c.

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P4-6: Finding operating and free cash flows: Consider the following balance sheets and selected data...

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