Case solutions corporate finance ross, westerfield, and jaffe 9th edition

Case Solutions

Corporate Finance

Ross, Westerfield, and Jaffe
9th edition

CHAPTER 2
CASH FLOWS AT WARF COMPUTERS

The operating cash flow for the company is: (NOTE: All numbers are in thousands of dollars)

OCF = EBIT + Depreciation – Current taxes
OCF = $1,332 + 159 – 386
OCF = $1,105

To calculate the cash flow from assets, we need to find the capital spending andchange in net working capital. The capital spending for the year was:

| |Capital spending | |
|  |Ending net fixed assets |$2,280 |
|  |– Beginning net fixed assets |1,792 |
|  |+ Depreciation | 159 |
|  | Netcapital spending |$ 647 |

And the change in net working capital was:

|  |Change in net working capital |
|  |Ending NWC |$728 |
|  |– Beginning NWC | 586 |
|  | Change in NWC|$142 |

So, the cash flow from assets was:

|  |Cash flow from assets | |
|  |Operating cash flow |$1,105 |
|  |– Net capital spending |647 |
|  |– Change in NWC | 142 |
|  |Cash flow from assets |$316 |

The cash flow to creditors was:

|  |Cash flow to creditors |  |
|  |Interest paid | $95 |
|  |– Net New Borrowing | 20 |
|  | Cash flow to Creditors | $75|

The cash flow to stockholders was:

|  |Cash flow to stockholders |  |
|  |Dividends paid | $212 |
|  |– Net new equity raised | –29 |
|  | Cash flow to Stockholders | $241 |

Theaccounting cash flow statement of cash flows for the year was:

|  |Statement of Cash Flows |
|  |Operations | |
|  |Net income |$742 |
|  |Depreciation|159 |
|  |Deferred taxes |109 |
|  |Changes in assets and liabilities | |
|  | Accounts receivable |(31) |
|  | Inventories|14 |
|  | Accounts payable |17 |
|  | Accrued expenses |(99) |
|  | Other |(9) |
|  |Total cash flow from operations|$902 |
|  |  | |
|  |Investing activities | |
|  | Acquisition of fixed assets |$(786) |
|  | Sale of fixed assets |139...