FIN350 Chapter 3 Exercise

(See the relevant Statements on page 3 & 4 )

Q1: Net cash from operations in year 2002 =

___________________________________

Q2: NOPAT = EBIT (1 – Tax rate)

How much is NOPAT for year 2002? _______________ 2001? ___________

Q3: How much is NOWC at thee end of year 2002? ________ 2001? ___________

NOWC = Current assets - Non-interest bearing current liability

Examples of Non-interest bearing current liability: account payable, unearned revenue.

Example of interest bearing current liability: note payable

Q4: Operating capital = NOWC + Net Fixed Assets

How much is operating capital at the end of year 2002?

2001?

Q5: How much is depreciation & amortization year 2002?

Q6: How much is operating cash flow (OCF) in 2002?

OCF = NOPAT + Depreciation & amortization

Q7: How much is free cash flow (FCF) for the firm in year 2002? _______________

1
Balance
Balance
Liabilitie
Cash
A/R
Income
Accts payabl
Inventories
2
Statem
Earning
Stateme
(2002)
Balance
earnin
OPERATING
Add
Net incom
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FCF == NOPAT – Net capital investment

Q1: Net cash from operations in year 2002 =

___________________________________
(See the relevant Statements)
= - $ 164, 176

Q2: NOPAT = EBIT (1 – Tax rate)

How much is NOPAT for year 2002? _______________ 2001? ___________

= - 130, 948*(1-0.4)= - $78, 568.8 for year 2002

=190, 428*(1-0.4)= $ 114, 256.8 for year 2001

Q3: How much is NOWC at thee end of year 2002? ________ 2001? ___________

NOWC = Current assets - Non-interest bearing current liability

Examples of Non-interest bearing current liability: account payable, unearned revenue.

Example of interest bearing current liability: note payable
For year 2002 = 1926802- (524160+489600)= $ 913, 042

For year 2001 =1124000-(1456000+136000)= $ 842, 400

Q4: Operating capital = NOWC + Net Fixed Assets

How much is operating capital at the end of year 2002? =913042+939790=$ 1, 852, 832
2001? =842, 400+344, 800=$1,187,200

Q5: How much is depreciation & amortization year 2002? $116960

Q6: How much is operating cash flow (OCF) in 2002? = -78568.8+116960= $ 38,391.2

OCF = NOPAT + Depreciation & amortization

Q7: How much is free cash flow (FCF) for the firm in year 2002? _______________

FCF == NOPAT – Net capital investment

=-78568.8-(1852832-1187200)= - $744, 200.8