Scribd Logo
Upload

Welcome to Scribd!

  • 2K views

    Assign 5 Chapter 7 Cash Flow Analysis Answer Cabrera 2019-2020

    Uploaded by

    mhikeedelantar
    1. Luis Shop's cash flow from operations in 20X5 was $817,000. 2. East Corporation's operating cash flow for 20X5 was $50 million, their investment in operating capital was $40 million, so their free cash flow was $10 million. 3. Tiffany Corporation's 20X3 EBIT was $45 million. Working back from their free cash flow of $23 million and investment in operating capital of $13 million shows their operating cash flow was $36 million.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Assign 5 Chapter 7 Cash Flow Analysis Answer Cabrera 2019-2020

    Uploaded by

    mhikeedelantar
    2K views6 pages
    1. Luis Shop's cash flow from operations in 20X5 was $817,000. 2. East Corporation's operating cash flow for 20X5 was $50 million, their investment in operating capital was $40 million, so their free cash flow was $10 million. 3. Tiffany Corporation's 20X3 EBIT was $45 million. Working back from their free cash flow of $23 million and investment in operating capital of $13 million shows their operating cash flow was $36 million.

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1. Luis Shop's cash flow from operations in 20X5 was $817,000. 2. East Corporation's operating cash flow for 20X5 was $50 million, their investment in operating capital was $40 million, so their free cash flow was $10 million. 3. Tiffany Corporation's 20X3 EBIT was $45 million. Working back from their free cash flow of $23 million and investment in operating capital of $13 million shows their operating cash flow was $36 million.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    2K views6 pages

    Assign 5 Chapter 7 Cash Flow Analysis Answer Cabrera 2019-2020

    Uploaded by

    mhikeedelantar
    1. Luis Shop's cash flow from operations in 20X5 was $817,000. 2. East Corporation's operating cash flow for 20X5 was $50 million, their investment in operating capital was $40 million, so their free cash flow was $10 million. 3. Tiffany Corporation's 20X3 EBIT was $45 million. Working back from their free cash flow of $23 million and investment in operating capital of $13 million shows their operating cash flow was $36 million.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 6

    PROBLEMS

    1. Luis Shop's cash flow from operations of 20X5 = 817,000

    Solution: (Statement of Cash Flow)

    CASH
    DEBIT CREDIT
    Beginning balance, Jan. 20X5 950,000
    Net Increase (Squeeze) 75,000
    1,025,000 Ending balance, Dec. 20X5

    2. East Corporation's:
    Operating Cash Flow for 20X5 = 50,000,000
    Investment in Operating Capital for 20X5 = 40,000,000
    Free Cash Flow for 20X5 = 10,000,000

    Solution: (Free Cash Flow)

    Given:

    EBIT: 62,000,000 EBIT


    Taxes: 17,000,000 Less: Tax
    Depreciation Expense: 5,000,000 Net Operating
    Increase in Fixed Asset: 32,000,000 Profit After Taxes
    Increase in Current Asset: 20,000,000 Add: Deperciation
    Increase in Current Liabilities: 12,000,000 expense
    Operating Cash Flow
    3. Tiffany Corporation's 20X3 EBIT= 45,000,000

    Solution: (Free Cash Flow)


    Work Back:
    Given:
    Free Cash Flow: 23,000,000 EBIT
    Investment in Operating Capital: 13,000,000 Less: Tax
    Depreciation Expense: 8,000,000 Net Operating
    Taxes: 17,000,000 Profit After Taxes
    Add: Deperciation
    expense
    Operating Cash Flow

    4. Beginning of the year balance for Long-Term Debt = 83,000,000

    Solution: (Statement of Cash Flow)


    Net Cash Flow from Financing A
    Given: Add: Dividends
    Net Cash Flow from Financing Activities: 20,000,000 Less: Δ Notes Payable
    Dividends: 105,000,000 Increase in Long-term debt
    Δ Notes Payable: 23,000,000
    Common and Preferred Stock : 0
    End-Year Balance of Long-Term Debt: 185,000,000

    LONG-TERM DEBT
    DEBIT CREDIT
    ? Beginning Balance
    ? Net Increase / (Decrease)
    Ending Balance 185,000,000

    Correct Solution:
    NOTES PAYABLE
    DEBIT CREDIT
    208,000,000 Beginning Balance
    23,000,000 Net Increase / (Decrease)
    Ending Balance 185,000,000
    CASH FLOW ANALYSIS

    Work Back:
    LUIS SHOP
    Stament of Cash Flow
    For the year ended, December 20X5

    Cash Flow From Operating Activities (817,000)


    , Dec. 20X5
    Cash Flow From Investing Activities (2,567,000)

    Cash Flow From Financing Activities 3,459,000

    Net Increase in Cash 75,000


    Cash Balance, Jan. 20X5 950,000
    Cash Balance, Dec. 20X5 1,025,000

    NET OPERATING PROFIT AFTER TAXES= EBIT (1- Tax rate)


    NOPAT= 62,000,000 (1- 0.274193548)
    NOPAT= 45,000,000
    62,000,000
    (17,000,000) OPERATING CASH FLOW= Net Operating Profit After Taxes + Depreciation Expense
    45,000,000 OCF= 45,000,000 + 5,000,000
    OCF= 50,000,000
    5,000,000
    INVESTMENT IN OPERATING CAPITAL= Δ Fixed Asset + Δ Net Operating Working Capital
    50,000,000 IOC= 32,000,000 + (20,000,000 - 12,000,000)
    IOC= 40,000,000

    FREE CASH FLOW= Operating Cash Flow - Investment in Operating Capital


    FCF= 50,000,000 - 40,000,000
    FCF= 10,000,000
    FREE CASH FLOW= Operating Cash Flow - Investment in Operating
    45,000,000 (Squeeze: 28M + 17M) 23,000,000 = OCF - 13,000,000
    (17,000,000) OCF= 23,000,000 +13,000,000
    28,000,000 (Squeeze: 36M - 8M) OCF= 36,000,000

    8,000,000

    36,000,000

    Net Cash Flow from Financing Activities 20,000,000


    dd: Dividends 105,000,000
    ess: Δ Notes Payable (23,000,000)
    ncrease in Long-term debt 102,000,000

    LONG-TERM DEBT
    DEBIT CREDIT
    83,000,000 Beginning Balance (Squeeze: 185M - 102M)
    102,000,000 Net Increase
    Ending Balance 185,000,000
    Tax Rate: Tax ÷ EBIT
    Tax Rate: 17,000,000 ÷ 62,000,000
    Tax Rate: 0.274193548

    rking Capital
    Investment in Operating Capital

    You might also like