Question

Pettijohn Inc.The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) Assets 2016 Cash and securities $ 1,554.0 Accounts receivable 9,660.0 Inventories 13,440.0 Total current assets $24,654.0 Net plant and equipment 17,346.0 Total assets $42,000.0 Liabilities and Equity Accounts payable $ 7,980.0 Notes payable 5,880.0 Accruals 4,620.0 Total current liabilities $18,480.0 Long-term bonds 10,920.0 Total debt $29,400.0 Common stock 3,360.0 Retained earnings 9,240.0 Total common equity $12,600.0 Total liabilities and equity $42,000.0 Income Statement (Millions of $) 2016 Net sales $58,800.0 Operating costs except depr’n $54,978.0 Depreciation $ 1,029.0 Earnings bef int and taxes (EBIT) $ 2,793.0 Less interest 1,050.0 Earnings before taxes (EBT) $ 1,743.0 Taxes $ 610.1 Net income $ 1,133.0 Other data: Shares outstanding (millions) 175.00 Common dividends $ 509.83 Int rate on notes payable & L-T bonds 6.25% Federal plus state income tax rate 35% Year-end stock price $77.69 Refer to the data for Pettijohn Inc. What is the firm’s cash flow per share?
a. $10.59
b. $12.35
c. $11.15
d. $11.74
e. $10.06

Answer 1

Answer:

Option b) $ 12.35

Explanation:

To calculate the total firm's Cash Flow first it's necessary to determine the Net Income of the operating year, this case $1,133.0 millions, then we need to sum the total depreciations of the year, this case $1,029.0 millions, with the information available these are the only items needed.

Total Cash Flow = 1,133.0 + 1,029.0 = $2,162.0 / 175.0 = $12.35 / per share.

The Net Income it's the value available after paid all the expenses of the company included Financial interest expenses and taxes, as there said, there si not debt amortization so the net Income it's the final Cash of the year plus de depreciation because  is not a cash output of the operative cost.