You have been provided with three years of historical data for a firm that has p
ID: 2732641 • Letter: Y
Question
You have been provided with three years of historical data for a firm that has paid dividends.
Year 2
Net Income
$151
Capital Expenditures
$201
Depreciation
$120
Non-Cash Working Capital
$293
The firm started Year 2 with a cash balance of $90 million, and raised 29% of its external financing needs from debt. The non-cash working capital in Year 1 was $280 million. Each year the company pays out 21% of its net income as dividends. Assuming that the firm did not buy back any stock over the period, estimate how much cash the firm would have at the end of Year 2. Assume that cash balances earn no interest and that the firm will continue to raise 29% of its external financing needs from debt.
Year 2
Net Income
$151
Capital Expenditures
$201
Depreciation
$120
Non-Cash Working Capital
$293
Explanation / Answer
Answer: $115.29 million.
Operating cash flow = 151 + 120 - 13 (increase in non-cash working capital) = $258 million.
Cash available = 90 + 258 - 31.71 (dividend) = $316.29 million.
Cash at the end = 316.29 - 201.00 (capital expenditure) = $115.29 million
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.