Two worksheets correspond to this assignment. One worksheet includes financial information for Nike and the other worksheet includes financial information for Caterpillar. Each worksheet includes the Balance Sheet and the Income Statement of the respective company. Below the Income Statement, you will find orange and blue boxes. Calculate the company’s Free Cash Flow for the most current year by completing the orange color boxes in the worksheet. In addition, calculate the uses for each company’s FCF by completing the blue boxes found below the FCF calculations.

When you have completed the worksheet for Nike and Caterpillar, write an analysis (one page per company) summarizing your results. In your analysis, interpret the meaning of each company’s FCF value. Describe the breakdown of how each company used this FCF. Include all five categories. From this “Usage” indicate how each company’s shareholders and debt holders were affected during 2016. For example, explain whether shareholders from each company contributed or received money from the company in 2016. Also, explain whether debt holders of each company contributed or received money from the company in 2016. Also indicate if either company used any of its free cash flow to purchase short term investments outside of the company. 

CATERPILLAR INC (CAT) BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data.	2012-12	2013-12	2014-12	2015-12	2016-12
Assets
Current assets
Cash
Cash and cash equivalents	5490	6081	7341	6460	7168
Total cash	5490	6081	7341	6460	7168
Receivables	18952	17176	16764	15686	14503
Inventories	15547	12625	12205	9700	8614
Deferred income taxes	1547	1553	1739	1526
Prepaid expenses	988	900	818	1046	1682
Total current assets	42524	38335	38867	34418	31967
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	29932	31316	31572	31977	31940
Accumulated Depreciation	-13471	-14241	-14995	-15887	-16618
Net property, plant and equipment	16461	17075	16577	16090	15322
Equity and other investments	272	272	257	246
Goodwill	6942	6956	6694	6615	6020
Intangible assets	4016	3596	3076	2821	2349
Deferred income taxes	2011	594	1404	1654	2790
Other long-term assets	17130	18068	17806	16653	16256
Total non-current assets	46832	46561	45814	44079	42737
Total assets	89356	84896	84681	78497	74704
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt	12391	11031	11501	12846	13965
Accounts payable	6753	6560	6515	5023	4614
Accrued liabilities	5578	5115	5986	5110	4299
Deferred revenues	2978	2360	1697	1146	1167
Other current liabilities	2055	2231	2178	2178	2087
Total current liabilities	29755	27297	27877	26303	26132
Non-current liabilities
Long-term debt	27752	26719	27784	25170	22750
Capital leases				77	68
Pensions and other benefits	11085	6973	8963	8843	9357
Minority interest	50	67	80	76	76
Other long-term liabilities	3182	3029	3231	3219	3184
Total non-current liabilities	42069	36788	40058	37385	35435
Total liabilities	71824	64085	67935	63688	61567
Stockholders' equity
Common stock	4481	4709	5016	5238	5277
Retained earnings	29558	31854	33887	34208	27377
Treasury stock	-10074	-11854	-15726	-17640	-17478
Accumulated other comprehensive income	-6433	-3898	-6431	-6997	-2039
Total stockholders' equity	17532	20811	16746	14809	13137
Total liabilities and stockholders' equity	89356	84896	84681	78497	74704
CATERPILLAR INC (CAT) INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data.	2012-12	2013-12	2014-12	2015-12	2016-12
Revenue	65875	55656	55184	47011	38537
Cost of revenue	47055	40727	39767	33742	28309
Gross profit	18820	14929	15417	13269	10228
Operating expenses
Research and development	2466	2046	2135	2165	1951
Sales, General and administrative	5919	5547	5697	5199	4686
Other operating expenses	1862	1708	2257	2649	3093
Total operating expenses	10247	9301	10089	10013	9730
Operating income	8573	5628	5328	3256	498
Interest Expense	467	465	484	507	505
Other income (expense)	130	-35	239	106	146
Income before taxes	8236	5128	5083	2855	139
Provision for income taxes	2528	1319	1380	742	192
Other income	14	-6	8		-6
Net income from continuing operations	5722	3803	3711	2113	-59
Other	-41	-14	-16	-11	-8
Net income	5681	3789	3695	2102	-67
Net income available to common shareholders	5681	3789	3695	2102	-67
Earnings per share
Basic	8.71	5.87	5.99	3.54	-0.11
Diluted	8.48	5.75	5.88	3.5	-0.11
Weighted average shares outstanding
Basic	653	645	617	594	584
Diluted	670	659	629	601	584
EBITDA	12313	9407	9354	6995	4274
Dividends Paid					1800
Net operating working capital
	NOWC =	Operating current assets	-	Operating current liabilities
2016	NOWC =		-
2016	NOWC =
	NOWC =	Operating current assets	-	Operating current liabilities
2015	NOWC =		-
2015	NOWC =
Total net operating capital
	TOC =	NOWC	+	Net Fixed assets
2016	TOC =		+
2016	TOC =
	TOC =	NOWC	+	Net Fixed assets
2015	TOC =		+
2015	TOC =
Investment in total net operating capital
	Inv. In TOC =	TOC	-	TOC
2016	Inv. In TOC =		-
2016	Inv. In TOC =
Net operating profit after taxes
	NOPAT =	EBIT	x	( 1 - T )
2016	NOPAT =		x
2016	NOPAT =
Free cash flow
	FCF =	NOPAT	-	Net investment in operating capital
2016	FCF =		-
2016	FCF =
Uses of FCF
after tax interest= interest*(1-Tax rate)			*		=
Change in LT Debt and Notes Payable			-		=
Dividends Paid					=
Change in Common Stock (incl additional paid in stock and treasury Stock) and preferred stock			-		=
Change in Short term investments			-		=
Total Use

Calculate MVA in 2016 and 2015 for both companies. Did Nike’s management create or destroy value for Nike between 2015 and 2016? Explain your answer. Did Caterpillar’s management create or destroy value for Caterpillar between 2015 and 2016? Explain your answer. 

Data Source is Morningstar.

Cite any additional sources you may use. Use APA style for in text citations and references.

NIKE (NKE) BALANCE SHEET
Fiscal year ends in May. USD in millions except per share data.	2012-05	2013-05	2014-05	2015-05	2016-05
Assets
Current assets
Cash
Cash and cash equivalents	2317	3337	2220	3852	3138
Short-term investments	1440	2628	2922	2072	2319
Total cash	3757	5965	5142	5924	5457
Receivables	3280	3117	3434	3358	3241
Inventories	3350	3434	3947	4337	4838
Deferred income taxes	274	308	355	389
Prepaid expenses	870	802	818	1968	1489
Total current assets	11531	13626	13696	15976	15025
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	5244	5500	6220	6352	7038
Accumulated Depreciation	-2965	-3048	-3386	-3341	-3518
Net property, plant and equipment	2279	2452	2834	3011	3520
Goodwill	201	131	131	131	131
Intangible assets	535	382	282	281	281
Deferred income taxes	919	993	1651	2201	2439
Total non-current assets	3934	3958	4898	5624	6371
Total assets	15465	17584	18594	21600	21396
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt	157	178	174	181	45
Accounts payable	1588	1646	1930	2131	2191
Taxes payable	246	290	636	245	244
Accrued liabilities	1654	1572	1993	3375	2445
Other current liabilities	220	240	294	402	433
Total current liabilities	3865	3926	5027	6334	5358
Non-current liabilities
Long-term debt	228	1210	1199	1079	2010
Deferred taxes liabilities	991	1292	1544	1480	1770
Total non-current liabilities	1219	2502	2743	2559	3780
Total liabilities	5084	6428	7770	8893	9138
Stockholders' equity
Common stock	3	3	3	3	3
Additional paid-in capital	4641	5184	5868	6776	7789
Retained earnings	5588	5695	4871	4685	4151
Accumulated other comprehensive income	149	274	85	1246	318
Total stockholders' equity	10381	11156	10824	12707	12258
Total liabilities and stockholders' equity	15465	17584	18594	21600	21396
NIKE (NKE) INCOME STATEMENT Fiscal year ends in May. USD in millions except per share data.	2012-05	2013-05	2014-05	2015-05	2016-05
Revenue	24128	25313	27799	30601	32376
Cost of revenue	13657	14279	15353	16534	17405
Gross profit	10471	11034	12446	14067	14971
Operating expenses
Sales, General and administrative	7431	7780	8766	9892	10469
Total operating expenses	7431	7780	8766	9892	10469
Operating income	3040	3254	3680	4175	4502
Other income (expense)	-57	18	-136	30	121
Income before taxes	2983	3272	3544	4205	4623		Tax Rate 2016 19%
Provision for income taxes	760	808	851	932	863
Net income from continuing operations	2223	2464	2693	3273	3760
Net income from discontinuing ops		21
Net income	2223	2485	2693	3273	3760
Net income available to common shareholders	2223	2485	2693	3273	3760
Earnings per share
Basic	1.21	1.39	1.52	1.9	2.21
Diluted	1.18	1.35	1.49	1.85	2.16
Weighted average shares outstanding
Basic	1840	1795	1767	1723	1698
Diluted	1879	1833	1812	1769	1742
EBITDA	3445	3767	4312	4824	5164
Dividend Paid					1022
Net operating working capital
	NOWC =	Operating current assets	-	Operating current liabilities
2016	NOWC =		-
2016	NOWC =
	NOWC =	Operating current assets	-	Operating current liabilities
2015	NOWC =		-
2015	NOWC =
Total net operating capital
	TOC =	NOWC	+	Net Fixed assets
2016	TOC =		+
2016	TOC =
	TOC =	NOWC	+	Net Fixed assets
2015	TOC =		+
2015	TOC =
Investment in total net operating capital
	Inv. In TOC =	TOC	-	TOC
2016	Inv. In TOC =		-
2016	Inv. In TOC =
Net operating profit after taxes
	NOPAT =	EBIT	x	( 1 - T )
2016	NOPAT =		x
2016	NOPAT =
Free cash flow
	FCF =	NOPAT	-	Net investment in operating capital
2016	FCF =		-
2016	FCF =
Uses of FCF
after tax interest= interest*(1-Tax rate)			*		=
Change in LT Debt and Notes Payable			-		=
Dividends Paid					=
Change in Common Stock (incl additional paid in stock and treasury Stock) and preferred stock			-		=
Change in Short term investments			-		=
Total Use

Answer rating: 100% (QA)

To calculate the free cash flow FCF for Nike and Caterpillar we can use the following formula FCF Ne... View the full answer