Finance System by Brigham

1. FINANCIAL STATEMENTS, CASH
FLOWS AND TAXES
Problem 2-12
pp. 55-56

2. 2008 2007
Sales $1,200.00 $1000.0
Operating costs excluding depreciation and
amortization
$1,020.00 850.0
EBITDA $180.0 $150.0
Depreciation and 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

3. APEX-PAL International Ltd.: Balance Sheets as of December 31
(million of dollars)
2008 20
Assets
Cash and Cash Equivalents $12.0 $1
Accounts Receivable 180.0 15
Inventories 180.0 20
Total Current Assets $372.0 $36
Net Plant and Equipment 300.0 25
Total Assets $672.0 $61
Liabilities and Equity
Accounts Payable $108.0 $9
Notes Payable 67.0
Accruals 72.0 6
Total Current Liabilities $247.0 $2
Long-term Bonds 150.0 15
Total Debt $397.0 $3
Common stock (50 million shares) 50.0 5
Retained Earnings 225.0 20
Common Equity $275.0 $25

4. 1. WHAT ARE THE NET WORKING CAPITAL FOR
2007 AND 2008?
 Net Working Capital= Current Assets-(Payables + Payables)
= $360.0 - ($90.0+$60.0)
=$360.0 - $150.0
2007 =$210.0
2008 =$210.0

5. 2. WHAT WAS THE 2008 FREE CASH FLOW?
 FCF=EBIT(1-T) + Depreciation – [(Capital
Expenditures + Change in Net Working Capital)]
= $150.0 (1-.40) + 30.0 – $80.0 + [(372-360) –
(180-150)]
= $90.0 + 30.0 – $80.0 + $18.0
FCF = $58 million dollars

6. 3. HOW WOULD YOU EXPLAIN THE LARGE
INCREASE IN 2008 DIVIDENDS?
 Due to the increase in the company’s net
income, there are more funds to render out
dividends.

8. MEMBERS:
Hannah Espanola
Karen Bacharo
Krestyl Anne Abrasado
Rey-An Trinidad
Arielle Soria
Joan Mae Lee
Engr. Katherene Lee
Leila Selebio
Charmi Gatoc
Charizze Hechanova
Paul Magbanua