Math Problem Corporate Finance

Corporate Finance
Instructions:
• Assume the reader of this question has no clear understanding of finance. However, he/she is sound mathematically and has good comprehension and reasoning skills.
• When writing out equations, use the Equation Editor, which can be found under the Insert Tab in Microsoft Word.
• The goal is to teach the subject matter and display the steps when solving the problem.

1. Using the attached financial statements for Widget Corp, find FCF2012.

Balance Sheets
Widget Corp.
(In Millions of Dollars)
(Winter 2012)

Assets 2012 2011 Liabilities and Equity 2012 2011
Cash $100 $80 Accounts Payable $50 $40
Short-term Investments 10 10 Notes Payable $200 $180
Accounts Receivable $400 $380 Accruals $190 $150
Inventories $450 $490 Total Current Liabilities $440 $370
Total Current Assets $960 $960
Net Plant and Equipment $1065 $965 Long-term Debt $400 $650
Total Debt $840 $1,020
Common Stock (50 mill) $485 $500
Retained Earnings $700 $405
Total Common Equity $1,185 $905
Total Assets $2,025 $1,925 Total Liabilities and Equity $2,025 $1925

Income Statements
Widget Corp
(In Millions of Dollars)
(Winter 2012)

2012 2011
Total Revenue $4000 $3500
Operating Expenses $3000 $2900
EBITDA $1000 $600
Depreciation $200 $170
Amortization $100 $90
Depreciation and Amortization $300 $260
EBIT (Operating Income) $700 $340
Less Interest $125 $115
EBT $575 $225
Less Taxes (40%) $230 $90
Net Income before preferred dividends $345 $135
Preferred Dividends $20 $20
Net Income $325 $115
Common Dividends $160 $110
Additions to Retained Earnings $165 $5
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