Last year Radner Robotics had $7.5 million in operating income (EBIT). Its depre
ID: 2679394 • Letter: L
Question
Last year Radner Robotics had $7.5 million in operating income (EBIT). Its depreciation expense was $2 million and its corporate tax rate was 35%. At year-3nd it had $14 million in current assets, $4 million in accounts payable, $2 million in accruals, and $15 million in net plant and equipment. Assume that Radnor's only noncash item was depreciation.a. What is the company's net income?
b. What was its net working capital?
c. Radnor had $12 million in net plant and equipment the prior year. The net working capital has remained constant over time. What is the company's free cash flow (FCF).
d.If the company had $4.5 million in retained earnings at the beginning of the year and paid out total dividends of $1.5 million, what was its retained earnings at the end of the year? All dividends declared were actually paid
Explanation / Answer
Hi, If you like my answer rate me first...that way only I can earn points. Thanks a) NEt Income = $7.5 * (1-35%) = $4.875 million b) NEt working Capital = $14 - $4 -$2 million = $8 million c) FCF = $4.875 + $2 - ($15 -12) = $3.875 million d) Ending Retained Earnings = $4.5 + $4.875 - $1.5 = $7.875 million
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