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;;;P4?5 Classifying inflows and outflows of cash Classify each of the following items as an;inflow (I) or an outflow (O) of cash, or as neither (N).;LG 2;LG 2;Item Change (\$) Item Change (\$);Cash +100 Accounts receivable?700;Accounts payable?1,000 Net profits +600;Notes payable +500 Depreciation +100;Long-term debt?2,000 Repurchase of stock +600;Inventory +200 Cash dividends +800;Fixed assets +400 Sale of stock +1,000;P4?6 Finding operating and free cash flows Consider the following balance sheets and;selected data from the income statement of Keith Corporation.;December 31;Assets 2015 2014;Cash \$ 1,500 \$ 1,000;Marketable securities 1,800 1,200;Accounts receivable 2,000 1,800;Inventories 2,900 2,800;Total current assets \$ 8,200 \$ 6,800;Gross fixed assets \$29,500 \$28,100;Less: Accumulated depreciation 14,700 13,100;Net fixed assets \$14,800 \$15,000;Total assets \$23,000 \$21,800;Liabilities and stockholders? equity;Accounts payable \$ 1,600 \$ 1,500;Notes payable 2,800 2,200;Accruals 200 300;Total current liabilities \$ 4,600 \$ 4,000;Long-term debt 5,000 5,000;Total liabilities \$ 9,600 \$ 9,000;Common stock \$10,000 \$10,000;Retained earnings 3,400 2,800;Total stockholders? equity \$13,400 \$12,800;Total liabilities and stockholders? equity \$23,000 \$21,800;Keith Corporation Balance Sheets;ISBN 1Depreciation expense \$1,600;Earnings before interest and taxes (EBIT) 2,700;Interest expense 367;Net profits after taxes 1,400;Tax rate 40%;a. Calculate the firm?s net operating profit after taxes (NOPAT) for the year ended;December 31, 2015, using Equation 4.1.;b. Calculate the firm?s operating cash flow (OCF) for the year ended December 31;2015, using Equation 4.3.;c. Calculate the firm?s free cash flow (FCF) for the year ended December 31, 2015;using Equation 4.4.;d. Interpret, compare, and contrast your cash flow estimates in parts b and c.;P4?9 Cash budget: Basic Grenoble Enterprises had sales of \$50,000 in March and;\$60,000 in April. Forecast sales for May, June, and July are \$70,000, \$80,000, and;\$100,000, respectively. The firm has a cash balance of \$5,000 on May 1 and wishes;to maintain a minimum cash balance of \$5,000. Given the following data, prepare;and interpret a cash budget for the months of May, June, and July.;(1) The firm makes 20% of sales for cash, 60% are collected in the next month;and the remaining 20% are collected in the second month following sale.;LG 4;LG 4;Depreciation expense \$1,600;Earnings before interest and taxes (EBIT) 2,700;Interest expense 367;Net profits after taxes 1,400;Tax rate 40%;Keith Corporation Income Statement Data (2015);LG 4;ISBN 1-269-86847-0;Principles of Managerial Finance, Fourteenth Edition, by Lawrence J. Gitman and Chad J. Zutter. Published by Prentice Hall. Copyright ? 2015 by Pearson Education, Inc.;152 PART 2 Financial Tools;(2) The firm receives other income of \$2,000 per month.;(3) The firm?s actual or expected purchases, all made for cash, are \$50,000;\$70,000, and \$80,000 for the months of May through July, respectively.;(4) Rent is \$3,000 per month.;(5) Wages and salaries are 10% of the previous month?s sales.;(6) Cash dividends of \$3,000 will be paid in June.;(7) Payment of principal and interest of \$4,000 is due in June.;(8) A cash purchase of equipment costing \$6,000 is scheduled in July.;(9) Taxes of \$6,000 are due in June.;P4?15 Pro forma income statement The marketing department of Metroline Manufacturing;estimates that its sales in 2016 will be \$1.5 million. Interest expense is expected;to remain unchanged at \$35,000, and the firm plans to pay \$70,000 in cash dividends;during 2016. Metroline Manufacturing?s income statement for the year ended;December 31, 2015, and a breakdown of the firm?s cost of goods sold and operating;expenses into their fixed and variable components are given below.;a. Use the percent-of-sales method to prepare a pro forma income statement for the;year ended December 31, 2016.;b. Use fixed and variable cost data to develop a pro forma income statement for the;year ended December 31, 2016.;c. Compare and contrast the statements developed in parts a and b. Which statement;probably provides the better estimate of 2016 income? Explain why.;ISBN 1-269-86847-0;Principles of Managerial Finance, Fourteenth Edition, by Lawrence J. Gitman and Chad J. Zutter. Published by Prentice Hall. Copyright ? 2015 by Pearson Education, Inc.;P4?18 Pro forma balance sheet Peabody & Peabody has 2015 sales of \$10 million. It;wishes to analyze expected performance and financing needs for 2017, which is;2 years ahead. Given the following information, respond to parts a and b.;(1) The percents of sales for items that vary directly with sales are as follows

Paper#76308 | Written in 18-Jul-2015

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