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Bailey Corporation recently reported the following income statement (dollars are in thousands): Sales................................................................................. $14,000,000 Operating costs excluding depreciation and amortization.......................7,000,000

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Bailey Corporation recently reported the following income statement (dollars are in thousands):

Sales................................................................................. $14,000,000

Operating costs excluding depreciation and amortization.......................7,000,000

EBITDA..............................................................................$ 7,000,000

Depreciation and amortization......................................................3,000,000

EBIT................................................................................ $ 4,000,000

Interest.................................................................................1,500,000

EBT.................................................................................. $ 2,500,000

Taxes........................................................................... (40%) 1,000,000

Net income.......................................................................... $ 1,500,000

Bailey's total operating capital is $20 billion and its after-tax cost of capital is 10 percent.

Therefore, Bailey's total after-tax dollar cost of operating capital is $2 billion. During the past year, Bailey made a $1.3 billion net investment in its operating capital.

a. What is Bailey's NOPAT for the year?

b. What is Bailey's net cash flow for the year?

c. What is Bailey's operating cash flow for the year?

d. What is Bailey's free cash flow for the year?

e. What is Bailey's EVA for the year?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...

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a NOPAT b Net Cash flows EBIT 1 Tax rate 4 000 000 000 1 40 2 400 000 000 Net income Depre…View the full answer


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Fundamentals of Financial Management

Fundamentals of Financial Management

ISBN: 978-0324272055

10th edition

Authors: Eugene F. Brigham, Joel F. Houston

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Question Posted: September 06, 2016 09:07:10
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In order to determine the amount of cash created by operating operations, the indirect technique for preparing the statement of cash flows entails adjusting net income with changes in balance sheet.

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