, Case Solutions
Corporate Finance
Ross, Westerfield, Jaffe, and Jordan
12th edition
01/02/2019
Prepared by:
Brad Jordan
University of Kentucky
Joe Smolira
Belmont University
,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 = $2,665 + 298 – 559
OCF = $2,404
To calculate the cash flow from assets, we need to find the capital spending and change in net
working capital. The capital spending for the year was:
Capital spending
Ending net fixed assets $4,322
– Beginning net fixed assets 3,356
+ Depreciation 298
Net capital spending $1,264
And the change in net working capital was:
Change in net working capital
Ending NWC $1,361
– Beginning NWC 1,097
Change in NWC $264
So, the cash flow from assets was:
Cash flow from assets
Operating cash flow $2,404
– Net capital spending 1,264
– Change in NWC 264
Cash flow from assets $876
The cash flow to creditors was:
Cash flow to creditors
Interest paid $164
– Net New Borrowing 36
Cash flow to Creditors $128
, C-2 CASE SOLUTIONS
The cash flow to stockholders was:
Cash flow to stockholders
Dividends paid $688
– Net new equity raised – 60
Cash flow to Stockholders $748
The accounting cash flow statement of cash flows for the year was:
Statement of Cash Flows
Operations
Net income $1,876
Depreciation 298
Deferred taxes 66
Changes in assets and liabilities
Accounts receivable –57
Inventories 26
Accounts payable 41
Accrued expenses –185
Other –16
Total cash flow from operations $2,049
Investing activities
Acquisition of fixed assets –$1,778
Sale of fixed assets 514
Total cash flow from investing activities –$1,264
Financing activities
Retirement of debt –$238
Proceeds of long-term debt 274
Dividends –688
Repurchase of stock –79
Proceeds from new stock issues 19
Total cash flow from financing activities –$712
Change in cash (on balance sheet) $73
Corporate Finance
Ross, Westerfield, Jaffe, and Jordan
12th edition
01/02/2019
Prepared by:
Brad Jordan
University of Kentucky
Joe Smolira
Belmont University
,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 = $2,665 + 298 – 559
OCF = $2,404
To calculate the cash flow from assets, we need to find the capital spending and change in net
working capital. The capital spending for the year was:
Capital spending
Ending net fixed assets $4,322
– Beginning net fixed assets 3,356
+ Depreciation 298
Net capital spending $1,264
And the change in net working capital was:
Change in net working capital
Ending NWC $1,361
– Beginning NWC 1,097
Change in NWC $264
So, the cash flow from assets was:
Cash flow from assets
Operating cash flow $2,404
– Net capital spending 1,264
– Change in NWC 264
Cash flow from assets $876
The cash flow to creditors was:
Cash flow to creditors
Interest paid $164
– Net New Borrowing 36
Cash flow to Creditors $128
, C-2 CASE SOLUTIONS
The cash flow to stockholders was:
Cash flow to stockholders
Dividends paid $688
– Net new equity raised – 60
Cash flow to Stockholders $748
The accounting cash flow statement of cash flows for the year was:
Statement of Cash Flows
Operations
Net income $1,876
Depreciation 298
Deferred taxes 66
Changes in assets and liabilities
Accounts receivable –57
Inventories 26
Accounts payable 41
Accrued expenses –185
Other –16
Total cash flow from operations $2,049
Investing activities
Acquisition of fixed assets –$1,778
Sale of fixed assets 514
Total cash flow from investing activities –$1,264
Financing activities
Retirement of debt –$238
Proceeds of long-term debt 274
Dividends –688
Repurchase of stock –79
Proceeds from new stock issues 19
Total cash flow from financing activities –$712
Change in cash (on balance sheet) $73
