Volbeat Corp. shows the following information on its 2015 income statement: sale

Question

Volbeat Corp. shows the following information on its 2015 income statement: sales = $235,000; costs = S 141,000; other expenses S7,900; depreciation expense = $14,600; interest expense S14,900; taxes = $19.810; dividends = S 12.000. In addition, you're told that the irm issued se,400 in new equity during 2015 and redeemed $4,900 in outstanding long-tem debt. What is the 2015 operating cash low? (Do not round intermediate calculations.) Operating cash flow 66290 h What is the 2015 cash flow to creditors? (Do not round intermediate b. calculations.) Cash flow to creditors S 19800 What is the 2015 cash flow to stockholders? (Do not round intermediate calculations.) Cash flow to S 5600 d. If net fixed assets increased by $25,000 during the year, what was the addition to NWC? (Do not round intermediate calculations.) Addition to NWC S

Explanation / Answer

In this case, to find the addition to NWC, we need to find the cash flow from assets.

We can then use the cash flow from assets equation to find the change in NWC.

We

know that cash flow from assets is equal to cash flow to creditors plus cash flow to

stockholders. So, cash flow from assets is:

Cash flow from assets = Cash flow to creditors + Cash flow to stockholders

Cash flow from assets = $19800+5600

Cash flow from assets = $14200

Net capital spending is equal to depreciation plus the increase i

n fixed assets, so:

Net capital spending = Depreciation + Increase in fixed assets

Net capital spending = $14600+25000

Net capital spending = 39600

Now we can use the cash flow from assets equation to find the change in NWC. Doing so, we

find:

Cash flow from assets = OCF–Change in NWC–Net capital spending

Volbeat Corp.

In this case, to find the addition to NWC, we need to find the cash flow from assets.

We can then use the cash flow from assets equation to find the change in NWC.

We

know that cash flow from assets is equal to cash flow to creditors plus cash flow to

stockholders. So, cash flow from assets is:

Cash flow from assets = Cash flow to creditors + Cash flow to stockholders

Cash flow from assets = $19800+5600

Cash flow from assets = $14200

Net capital spending is equal to depreciation plus the increase i

n fixed assets, so:

Net capital spending = Depreciation + Increase in fixed assets

Net capital spending = $14600+25000

Net capital spending = 39600

Now we can use the cash flow from assets equation to find the change in NWC. Doing so, we

find:

Cash flow from assets = OCF–Change in NWC–Net capital spending

14200 = 66290-Change in NWC-39600 Change in NWC=66290-39600-14200 12490 Parrot Head Enterprises Opening Fixed Assets 3877 Add: New Purchases 1870 Total Assets 5747 Closing Fixed Assets 4596 Assets Sold 1151 Ocf=EBIT+Depreciation-Taxes EBIT=Sales-Cost-Depreciation EBIT 5360 Less Interest 180 EBT 5180 Less Tax 1813 EAT 3367 5360+1000-1813 OCF 4547 Change in NWC=27 Net Capital Spending=Depr+Increase IN Fixed Asset 1000+719 1719 Cash From Assets=OCF-Change In NWC-Net Capital Spending 4547-27-1719 2801 Opening of Debt 2031 Add Debt Raised 400 Total 2431 Closing of Debt 2192 Debt Retired 239 Cash Flow from Creditors= Interest- Net Debt Raised Net Debt Raised=400-239=161 Cash Flow From Crs= 180-161 Cash Flow From Crs=19 You Buy a Car Monthly payment= (Initial Principal*r*(1+r)^n)/(1+r)^n-1 77500*0.059*(1+0.059)^48/(1+0.059)^48-1 4884.239 Effective Annual Rate=(1+i/n)^n-1 (1+.059/48)^48-1 (1+0.001229)^48-1 1.060728-1 0.060727 6.0727

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