FREE CASH FLOW Financial information for Powell Panther Corporation is shown here.
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Powell Panther Corporation: Income Statements |
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2008 |
2007 |
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Sales |
$1,200.0 |
$1,000.0 |
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Operating costs excluding depreciation and amortization |
1,020.0 |
850.0 |
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EBITDA |
$ 180.0 |
$ 150.0 |
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Depreciation & amortization |
30.0 |
25.0 |
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Earnings before interest and taxes |
$ 150.0 |
$ 125.0 |
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Interest |
21.7 |
20.2 |
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Earnings before taxes |
$ 128.3 |
$ 104.8 |
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Taxes (40%) |
51.3 |
41.9 |
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Net income |
$ 77.0 |
$ 62.9 |
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Common dividends |
$ 60.5 |
$ 46.4 |
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Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars) |
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2008 |
2007 |
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Assets |
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Cash and equivalents |
$ 12.0 |
$ 10.0 |
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Accounts receivable |
180.0 |
150.0 |
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Inventories |
180.0 |
200.0 |
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Total current assets |
$372.0 |
$360.0 |
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Net plant and equipment |
300.0 |
250.0 |
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Total assets |
$672.0 |
$610.0 |
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Liabilities and Equity |
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Accounts payable |
$108.0 |
$ 90.0 |
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Notes payable |
67.0 |
51.5 |
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Accruals |
72.0 |
60.0 |
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Total current liabilities |
$247.0 |
$201.5 |
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Long term bonds |
150.0 |
150.0 |
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Total debt |
$397.0 |
$351.5 |
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Common stock (50 million shares) |
50.0 |
50.0 |
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Retained earnings |
225.0 |
208.5 |
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Common equity |
$275.0 |
$258.5 |
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Total liabilities and equity |
$672.0 |
$610.0 |
a. What was net working capital for 2007 and 2008?
b. What was the 2008 free cash flow?
c. How would you explain the large increase in 2008 dividends?