FINMGT1

Module 7–Cash Flow Analysis Assignment

Problem 1:

Net change in cash and marketable securities = 1,025,000 - 950,000 = 75,000

Cash Flows from Operating Activities (Squeezed) (817,000)

Cash Flows from Investing Activities (2,567,000)

Cash Flows from Financing Activities 3,459,000
Net Change in Cash and Marketable Securities P75,000

Problem 2:

East Corporation operating cash flow was:

Operating Cash Flow = EBIT – Taxes + Depreciation = (62,000,000 – 17,000,000 + 5,000,000) =
50,000,000

Investment in operating capital for 20X5 was:

Investment in operating capital = Gross fixed assets + Net operating working capital =
32,000,000 + (20,000,000 – 12,000,000) = 40,000,000

Accordingly, East Corporation free cash flow for 20X5 was:

FCF = Operating cash flow – Investment in operating capital = 50,000,000 – 40,000,000 =
10,000,000.

Problem 3:
Tiffany Corporation’s free cash flow for 20X5 was:

Free Cash Flow = Operating cash flow – Investment in operating capital

23,000,000 = Operating cash flow – 13,000,000
So, operating cash flow = 23,000,000 + 13,000,000 = 36,000,000

Tiffany Corporation’s operating cash flow was:

Operating Cash Flow F = EBIT – Taxes + Depreciation

36,000,000m= (EBIT – 17,000,000 + 8,000,000.)
So, EBIT = 36,000,000 + 17,000,000 – 8,000,000 = 45,000,000.

Problem 4:

Cash flow from Financing Activities

Add: Increase in notes payable 23,000,000
Increase in long-term debt (20m + 105m- 23m) 102,000,000
Increase in common and preferred stock 0m
Less: Pay stock dividends (105,000,000)
Net cash flow from financing activities: 20,000,000

Thus, beginning of year balance for long-term debt = 185 - 102m = 83m.