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Fall 2016 Smith Brothers Corporation INCOME STATEMENTS FOR YEAR ENDING DECEMBER 31 (MILLIONS OF DOLLARS) 2015 2014 Sales $ 300.00 360.00 $ Operating costs (excluding depreciation and amortization) 306.00 255.00 Earnings before interest, taxes, depreciation, and amortization (EBITDA) 54.00 $ 45.00 $ Depreciation and amortization expense 8.00 7.00 Earnings before interest and taxes (EBIT) $ 46.00 38.00 $ Interest Expense 7.00 6.00 Earnings before taxes (EBT) $ 39.00 $ 32.00 Taxes (13.0%) 5.07 4.16 Net income $ 33.93 $ 27.84 Common dividends $ 12.60 $ 10.40 Smith Brothers Corporation BALANCE SHEETS FOR YEAR ENDING DECEMBER 31 (MILLIONS OF DOLLARS) 2015 2014 Assets: Cash $ 4.00 3.00 $ Accounts receivable 54.00 45.00 Inventories 67.00 60.00 Total current assets $ 125.00 $108.00 Net fixed assets 90.00 75.00 Total assets $ 215.00 $ 183.00 Liabilities and equity: Accounts payable $ 33.00 $ 25.00 Accruals 22.00 18.00 Notes payable 15.23 16.56 Total current liabilities $ 70.23 $ 59.56 Long-term bonds 45.00 45.00 Total liabilities $ 115.23 $ 104.56 Common stock (5 million shares) 15.00 15.00 Retained earnings 84.77 63.44 Total equity $ 99.77 $ 78.44 Total liabilities and equity $ 215.00 $ 183.00 a. What is Smith's net operating profit after taxes (NOPAT) for 2015 and 2014? b. What is Smith's net operating working capital (NOWC) for 2015 and 2014? c. What is Smith's operating capital for 2015 and 2014? d. What is Smith's free cash flow (FCF) for 2015? e. Assuming 12% cost of capital for each year, what is Smith's economic value added (EVA) for 2015 and 2014? f. Please list two possible uses of free cash flow

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