1. Last year Cole Furnaces had $5 million in operating income (EBIT).

The
company had a net depreciation expense of $1 million and an interest
expense of $1 million; its corporate tax rate was 40%. The company has
$14 million in operating current assets and $4 million in operating current
liabilities; it has $15 million in net plant and equipment. It estimates that it
has an after-tax cost of capital of 10%. Assume that Cole’s only noncash
item was depreciation.
a. What was the company’s net income for the year?
b. What was the company’s net cash flow?
c. What was the company’s net operating profit after taxes (NOPAT)?
d. Calculate net operating working capital and total net operating capital for the
current year.
e. If total net operating capital in the previous year was $24 million, what was the
company’s free cash flow (FCF) for the year?
f. What was the company’s Economic Value Added (EVA)?

2. Income Statement: Little Books Inc. recently reported $3 million of net

income. Its EBIT was $6 million, and its tax rate was 40%. What was its
interest expense? (Hint: Write out the headings for an income statement
and then fill in the known values. Then divide $3 million net income by 1 −
T = 0.6 to find the pre-tax income. The difference between EBIT and
taxable income must be the interest expense. Use this same procedure to
work some of the other problems.)

3. Pearson Brothers recently reported an EBITDA of $7.5 million and net

income of $1.8 million. It had $2.0 million of interest expense, and its
corporate tax rate was 40%. What was its charge for depreciation and
amortization?
4. Net Cash Flow Kendall Corners Inc. recently reported net income of $3.1
million and depreciation of $500,000. What was its net cash flow? Assume
it had no amortization expense.
5. Statement of Retained Earnings: In its most recent financial statements,
Newhouse Inc. reported $50 million of net income and $810 million of
retained earnings. The previous retained earnings were $780 million. How
much in dividends was paid to shareholders during the year?
6. Davidson Corporation: Income statement 31 December 2005 (Million USD)
2005 2004
Sales 1200 1000
Operating costs excluding 1020 850
depreciation
EBITDA 108 150
Depreciation and amorization 30 25
EBIT 150 125

1
Interest payment 21.7 20.2
EBT 128.3 104.8
Tax (40%) 51.3 41.9
Net profit 77 62.9
Common dividends 60.5 46.4

1. Davidson Corporation: Balance sheet 31 December 2005 (Million USD)

Asset 2005 2004

Cash and cash equivalents $12 10
Account receivables 180 150
Inventory 180 200
Total current assets 372 360
Net plant and equipment 300 250
Total assets 672 610

Liabilities and equity

Account payables $108 90
Notes payable 67 51.5
Accruals 72 60
Total current liabilities 247 201.5
Long-term bonds 150 150
Total liabilities 397 351.5
Common stock 50 50
50 million common stocks
Retained earnings 225 208.5
Total common equity 275 258.5
Total liabilities and equity 672 610

a. What was the company’s net operating profit after taxes (NOPAT) in 2005?
b.Vốn lưu động hoạt động trong năm 2004 và 2005 (NOWC)?
c. Calculate net operating working capital and total net operating capital for the
year 2004 and 2005
d. Calculate free cash flow for 2005?
E. Why an increase in dividend payment