Problem 1: PRACTICE EXAMPLE ON FINANCIAL STATEMENTS AND FREE CASH FLOWS

Please show all workings so I can understand. thank you!

Suppose a company reported Revenues of $250 million for the most recent year. The Cost of Goods Sold were $45 million, the Selling, General and Administrative expenses equaled $15 million, and the Depreciation for the most recent year was $20 million. Furthermore, you know that the change in the firms operating net working capital (excluding cash) was $35 million, and the net capital expenditures equaled $15 million. The firms net income equals $60 million. Assuming that the firm has a marginal corporate tax rate of 40%, and based on this information, please answer the following questions.

1. (i) Determine the Cash Flow from Operations from a finance perspective (CFO) for the firm for the most recent year. How does this CFO differ from the Cash Flow from Operations reported in the Accounting Statement of Cash Flows?

2. (ii) What is the Free Cash Flow that the firm generated in the most recent year? What does the Free Cash Flow measure?

3. (iii) Determine the net cash flow that the firm paid out to the debt holders (assuming that the firm issued no new debt in the past year).

4. (iv) If the firm added $10 million to its excess cash reserves (and therefore did not pay this amount out to its investors), and the firm raised no new equity, what are the dividends that the firm paid out to its shareholders in the most recent year and what is the amount of retained earnings?