Financial information for Powell Panther Corporation is shown here.

Powell Panther Corporation: Income Statements for Year Ending December 31

(Millions of Dollars)

__________________________________________________2012________________2011

Sales.................................................................$1,200.0....................$1,000.0

Operating costs excluding depreciation and amortization.....1,020.0.........................850.0

EBITDA..............................................................$ 180.0......................$ 150.0

Depreciation & amortization..........................................30.0.........................25.0

Earnings before interest and taxes................................$ 150.0.....................$ 125.0

Interest...................................................................21.7.........................20.2

Earnings before taxes...............................................$ 128.3.....................$ 104.8

Taxes (40%)..............................................................51.3.........................41.9

Net income.............................................................$ 77.0......................$ 62.9

Common dividends...................................................$ 60.5.....................$ 46.4

Powell Panther Corporation: Balance Sheets as of December 31

(Millions of Dollars)

___________________________________________________2012______________2011

Assets

Cash and equivalents.................................................$ 12.0.....................$ 10.0

Accounts receivable...................................................180.0.....................150.0

Inventories..............................................................180.0.....................200.0

Total current assets...................................................$372.0.....................$360.0

Net plant and equipment.............................................300.0......................250.0

Total assets............................................................$672.0.....................$610.0

Liabilities and Equity

Accounts payable....................................................$108.0.....................$ 90.0

Notes payable............................................................67.0........................51.5

Accruals..................................................................72.0........................60.0

Total current liabilities..............................................$247.0.....................$201.5

Long-term bonds......................................................150.0.......................150.0

Total debt.............................................................$397.0.....................$351.5

Common stock (50 million shares)....................................50.0........................50.0

Retained earnings......................................................225.0.......................208.5

Common equity.......................................................$275.0.....................$258.5

Total liabilities and equity..........................................$672.0......................$610.0

a. What was net operating working capital for 2011 and 2012?

b. What was the 2012 free cash flow?

c. How would you explain the large increase in 2012 dividends?