Jetson Spacecraft Corp. shows the following information on its 2011 income statement: sales = $380,000; costs = $300,000; other expenses = $7,900; depreciation expense = $15,000; interest expense = $13,000; taxes = $15,435; dividends = $10,000. In addition, you're told that the firm issued $4,500 in new equity during 2011 and redeemed $3,000 in outstanding long-term debt.

a. What is the 2011 operating cash flow?

b. What is the 2011 cash flow to creditors?

c. What is the 2011 cash flow to stockholders?

d. If net fixed assets increased by $20,000 during the year, what was the addition to NWC?

a) $56,665

b) $16,000

c) $5,500

d) $165

Explanation:

A) Compute the Operating Cash Flow for 2011

Sales for the year $380,000

Subtract:

Costs ($300,000)

Other Expenses ($7,900)

Taxes ($15,435)

Operating Cash flow $56,665

B) The Cash Flow to the Creditors

= The interest paid - The Net new borrowing

= $13,000 - ( - $3,000)

= $16,000

C) Determine the Cash Flow to Stockholders

The formula = Dividends paid - The New Net Equity

= $10,000 - $4,500

=$5,500

D) Compute the Additional NWC

The formula is as follows

Operating Cash flow calculated in step 1 - Interest Expenses-Dividend + New Equity Issued - Outstanding Long term debt - (Fixed Asst increased - Depreciation expenses)

= $56,665 - $13,000 - $10,000 + 4,500 - $3,000 - (20,000+15,000)

= $165