Volbeat Corp. shows the following information on its 2015 income statement: sales = $235,000; costs = $147,000; other expenses = $7,900; depreciation expense = $17,500; interest expense = $13,500; taxes = $17,185; dividends = $10,500. In addition, you’re told that the firm issued $5,000 in new equity during 2015 and redeemed $3,500 in outstanding long-term debt.

Volbeat Corp. shows the following information on its 2015 income statement: sales = $235,000; costs = $147,000; other expenses = $7,900; depreciation expense = $17,500; interest expense = $13,500; taxes = $17,185; dividends = $10,500. In addition, you’re told that the firm issued $5,000 in new equity during 2015 and redeemed $3,500 in outstanding long-term debt.

  

a.	What is the 2015 operating cash flow? (Do not round intermediate calculations.)

  

Operating cash flow

$

  

b.	What is the 2015 cash flow to creditors? (Do not round intermediate calculations.)

  

Cash flow to creditors

$

  

c.	What is the 2015 cash flow to stockholders? (Do not round intermediate calculations.)

  

Cash flow to stockholders

$

  

d.	If net fixed assets increased by $20,000 during the year, what was the addition to NWC? (Do not round intermediate calculations.)

  

Addition to NWC

$

 

Explanation:

To find the OCF, we first calculate net income.

 
 

Income Statement
Sales	$	235,000
Costs		147,000
Other expenses		7,900
Depreciation		17,500
EBIT	$	62,600
Interest		13,500
Taxable income	$	49,100
Taxes		17,185
Net income	$	31,915
Dividends	$	10,500
Additions to RE	$	21,415

 
a.

OCF = EBIT + Depreciation – Taxes

OCF = $62,600 + 17,500 – 17,185

OCF = $62,915

 
b.

CFC = Interest – Net new LTD

CFC = $13,500 – (–3,500)

CFC = $17,000

Note that the net new long-term debt is negative because the company repaid part of its long-term debt.

c.

CFS = Dividends – Net new equity

CFS = $10,500 – 5,000

CFS = $5,500

d.

We know that CFA = CFC + CFS, so:

CFA = $17,000 + 5,500

CFA = $22,500

CFA is also equal to OCF – Net capital spending – Change in NWC. We already know OCF. Net capital spending is equal to:

Net capital spending = Increase in NFA + Depreciation

Net capital spending = $20,000 + 17,500

Net capital spending = $37,500