Cash Flow and Ratio Analysis Study Problems 3

Cash Flow and Ratio Analysis Study Problems 3 - of $42...

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Cash Flow and Ratio Analysis Study Problems 3-2 (page 85) and 4-2 (page 122) and post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. 3.2 (Computing cash flow). Given the following information, compute the firm’s free cash flows and financing cash flows: Increase in current assets $ 50 Operating income 75 Interest expenses 25 Increase in account payables 35 Dividends 15 Increase in common stock 20 Increase in net fixed taxes 23 Depreciation expenses 12 Income taxes 17 Free Cash Flows * The change in gross fixed assets is equal to the change in net fixed assets ($23) plus the depreciation expense for the year of $12, resulting in a change in gross fixed assets of $35. Financing Cash Flows: 4.2 (Ratio Analysis). The Allen Corporation had sales in 2008 of $65 million, total assets
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Unformatted text preview: of $42 million, and total liabilities of $20 million. The interest rate on the companies debt is 6% and its tax rate is 30% . The operating profit margin was 12 percent. What was Operating income Depreciation expense Income taxes After-tax cash flows from operations Increase in current assets (50) Increase in current liabilities 35 Increase in networking capital. Change in gross fixed assets* Firms Free Cash Flows Interest expense ($25) Increase in common stock Dividend Financing Cash Flows ($20) the 2008 operating income and net income?. What was operating returned on assets and returned on equity? Assume the interest must be paid on all of the debt. Operating Income = .12 X $65,000,000 = 7,800,000 Net Income: Operating Income 7,800,000 Minus: Interest expense - (.06 X 20,000,000) = 1,200,000 Taxes: -[.3 X (7,800,000 1,200,000)] = 2,000,000 Net Income 4,600,000 = = .19 or 19% = = .21 or 20%...
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This note was uploaded on 11/12/2010 for the course FINANCE bus401 taught by Professor Smith during the Spring '10 term at Ashford University.

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Cash Flow and Ratio Analysis Study Problems 3 - of $42...

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