Need help trying to figure out how certain figures were derived for net working capital, then the change in net working capital, and capital expenditures so I can figure out the free cash flows.
(See attached file for full problem description)
Question: I am suppose to figure out how $7,385 (from the year1999 to 2000) and $665 (for year2000 to 2001) is the change in net working capital is derived from the given information. The balance sheet below shows the data for 1998 and 1999. Information about future forecast for 2000 is that receivables, prepaid expenses, and other current assets should increase proportionately to sales, representing a combined 25 percent of future sales. (Sales for 2000 is $60,496) and as a result, accounts payable, accrued liabilities, and short-term notes payable should decline to 20 percent of future sales. These two percentages are the same for 2001 also.(Sales for 2001 are $73,805)
I don't know if this is relevant to this question but, additional information is: On December 31,1999 the company owed $62.46 million in long-term senior and subordinated debt, including short-term notes due At that time, the company had $22 million in bank credit facilities available, but it had not yet borrowed against these available facilities It also has $81,000 in cash on its balance sheet.
Taxes are 38.5 percent rate is expected/Cost of capital is 11.2 percent (again, I don't know if this is relevant to this particular question, but didn't want to leave it out just in case)
I thought the equation to figure out net working capital is: Net working capital=inventory+accts. receivable-accts payable,
and then take those results NWC for 1998 and substract from 1999 figure, and then proceed to find the change in NWC by using the %'s given for 2000 and then subtracting that, and then same for 2001?
Please help, don't understand how $7,385 (2000) and $665 (2001) was derived!
Could you also help me figure out how $8,167 (for 2000) and $9,964 (for 2001) for capital expenditures were derived?
Cash and Cash equivalents-$211 $81
Accounts Receivable-$5,776 $6,564
Pre-paid expenses and other assets-$334 $674
Deferred income taxes-$367 $386
Total Assets _______________ __________
for 1998 - $6,688 $7,705
Plant, property, and equipment 61,830 67,189
Other concurrent assets 1,246 1,312
Total noncurrent assets __________ _________
Total assets __________ __________
Current Portion of long-term debt-$4,589 $6,024
Accounts Payable- $5,489 $6,334
Acrued Liabilities $4,800 5,650
Total Current Liabilities 14,878 18,008
Long-term debt, less current portion-50,283 56,433
Total concurrent liabilities $50,283 $56,433
Total Liabilities ________ ___________
Total Shareholder's Equity $4,603 $1,765
Total liabilities and shareholder's
Equity __________ _________
The solution explains howo to calculate Net working capital, change in NWC, and capital expenditures given the balance for 2 years.