Rosnan Industries' 2013 and 2012 balance sheets and income statements are shown below. Balance Sheets:
2013 2012
Cash and equivalents $100 $85
Accounts receivable 275 300
Inventories 375 250
Total current assets $750 $635
Net plant and equipment 2,300 1,490
Total assets $3,050 $2,125
Accounts payable $150 $85
Accruals 75 50
Notes payable 150 75
Total current liabilities $375 $210
Long-term debt 450 290
Common stock 1,225 1,225
Retained earnings 1,000 400
Total liabilities and equity $3,050 $2,125
Income Statements:
2013 2012
Sales $2,600 $1,400
Operating costs excluding depreciation 1,250 1,000
EBITDA $1,350 $400
Depreciation and amortization 100 75
EBIT $1,250 $325
Interest 62 45
EBT $1,188 $280
Taxes (40%) 475 112
Net income $713 $168
Dividends paid $53 $48
Addition to retained earnings $600 $120
Shares outstanding 100 100
Price $25.00 $22.50
WACC 10.00%
The balance in the firm's cash and equivalents account is needed for operations and is not considered "excess" cash. Using the financial statements given above, what is Rosnan's 2013 free cash flow (FCF)? Use a minus sign to indicate a negative FCF.
$

–$32

Explanation:

Rosnan Industries' 2013 free cash flow (FCF)

Details                                                                               $        

Net income                                                                         713

Add Non-Cash Expenses:

Depreciation and amortization                                         100

(Increase) decrease in non-cash current assets:

Decrease in accounts receivable (300 - 275)                  25

Increase inventories (375 - 250)                                     (125)

Increase (decrease) in current liabilities:

Increase in total current liabilities (375 - 210)                  165

Capital expenditure:

Increase in net plant and equipment (2,300 - 1,490)     (810)

Depreciation and amortization                                        (100)  

Free cash flow                                                                  (32)  

Therefore, Rosnan's 2013 free cash flow (FCF) minus $32.

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