SUBJECT is FINANCE
Free Cash Flows
Rhodes Corporation’s financial statements are shown below.
Rhodes Corporation: Income Statements for Year EndingDecember 31
(Millions of Dollars)
| 2020 | | 2019 |
| Sales | $ | 13,000 | | $ | 11,000 |
| Operating costs excluding depreciation | | 11,588 | | | 9,682 |
| Depreciation and amortization | | 400 | | | 370 |
| Â Â Â Â Earnings before interest and taxes | $ | 1,012 | | $ | 948 |
| Less interest | | 240 | | | 200 |
| Â Â Â Â Pre-tax income | $ | 772 | | $ | 748 |
| Taxes (25%) | | 193 | | | 187 |
| Net income available to common stockholders | $ | 579 | | $ | 561 |
| Common dividends | $ | 202 | | $ | 200 |
Rhodes Corporation: Balance Sheets as of December 31(Millions of Dollars)
| 2020 | | 2019 |
| Assets |
| Cash | $ | 650 | | $ | 600 |
| Short-term investments | | 120 | | | 100 |
| Accounts receivable | | 2,750 | | | 2,500 |
| Inventories | | 1,650 | | | 1,400 |
| Â Â Â Â Total current assets | $ | 5,170 | | $ | 4,600 |
| Net plant and equipment | | 3,750 | | | 3,500 |
| Total assets | $ | 8,920 | | $ | 8,100 |
|
| Liabilities and Equity |
| Accounts payable | $ | 1,300 | | $ | 1,200 |
| Accruals | | 650 | | | 600 |
| Notes payable | | 192 | | | 100 |
| Â Â Â Â Total current liabilities | $ | 2,142 | | $ | 1,900 |
| Long-term debt | | 1,300 | | | 1,200 |
| Â Â Â Â Total liabilities | $ | 3,442 | | | 3,100 |
| Common stock | | 3,901 | | | 3,800 |
| Retained earnings | | 1,577 | | | 1,200 |
| Â Â Â Â Total common equity | $ | 5,478 | | $ | 5,000 |
| Total liabilities and equity | $ | 8,920 | | $ | 8,100 |
Suppose the federal-plus-state tax corporate tax is 25%. Answerthe following questions.
- What is the net operating profit after taxes (NOPAT) for 2020?Enter your answer in millions. For example, an answer of $1 millionshould be entered as 1, not 1,000,000. Round your answer to thenearest whole number.
- What are the amounts of net operating working capital for bothyears (2020 and 2019)? Enter your answers in millions. Round youranswers to the nearest whole number.
2020: $Â Â Â million
2019: $Â Â Â million
- What are the amounts of total net operating capital for bothyears? Enter your answers in millions.
2020: $Â Â Â million
2019: $Â Â Â million
- What is the free cash flow for 2020? Enter your answer inmillions. Cash outflow, if any, should be indicated by aminus sign. Round your answer to the nearest whole number.
$Â Â Â Â million
- What is the ROIC for 2020? Round your answer to two decimalplaces.
  %
- How much of the FCF did Rhodes use for each of the followingpurposes: after-tax interest, net debt repayments, dividends, netstock repurchases, and net purchases of short-term investments?(Hint: Remember that a net use can be negative.) Enteryour answers in millions.
| After-tax interest payment | $Â Â Â Â million |
| Reduction (increase) in debt | $Â Â Â Â million |
| Payment of dividends | $Â Â Â million |
| Repurchase (Issue) stock | $Â Â Â million |
| Purchase (Sale) of short-term investments | $Â Â Â million |
