Fin350 Week 3 Module 3 Practice Problems Essay

726 Words Jun 1st, 2016 3 Pages
Fin350 Week 3 Module 3 Practice Problems
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P4–5 Classifying inflows and outflows of cash Classify each of the following items as an inflow (I) or an outflow (O) of cash, or as neither (N).

P4–6 Finding operating and free cash flows Consider the following balance sheets and selected data from the income statement of Keith Corporation.
a. Calculate the firm’s net operating profit after taxes (NOPAT) for the year ended December 31, 2015, using Equation 4.1.
b. Calculate the firm’s operating cash flow (OCF) for the year ended December 31, 2015, using Equation 4.3.
c. Calculate the firm’s free cash flow (FCF) for the year ended December 31, 2015
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Interest expense is expected to remain unchanged at $35,000, and the firm plans to pay $70,000 in cash dividends during 2016. Metroline Manufacturing’s income statement for the year ended December 31, 2015, and a breakdown of the firm’s cost of goods sold and operating expenses into their fixed and variable components are given below.
a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2016.
b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2016.
c. Compare and contrast the statements developed in parts a and b. Which statement probably provides the better estimate of 2016 income? Explain why.

P4–18 Pro forma balance sheet Peabody & Peabody has 2015 sales of $10 million. It wishes to analyze expected performance and financing needs for 2017, which is 2 years ahead. Given the following information, respond to parts a and b.
(1) The percents of sales for items that vary directly with sales are as follows: Accounts receivable, 12% Inventory, 18% Accounts payable, 14% Net profit margin, 3%
(2) Marketable securities and other current liabilities are expected to remain unchanged.
(3) A minimum cash balance of $480,000 is desired.
(4) A new machine costing $650,000 will be acquired in 2016, and equipment costing $850,000 will be purchased in 2017. Total depreciation in 2016 is forecast as…

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