Name: Pamela D.

Morte Subject: AEC 127 – MA3

Course and Year: BSMA – 3 Schedule: MWF (1:30pm – 2:30pm)
ACTIVITY FOR CHAPTER 3
(Financial Statements, Cash Flow and Taxes)

Problem 1. EVA COMPUTATION

ROIC is R30 million / R100 million x (1 – tax rate of 30%) = 21%.
EVA = (ROIC – WACC) x IC
EVA = (21% - 15%) x R100 million
EVA = 6% x R100 million
EVA = R6 million
Problem 2. Working Capital
a.) compute for the net working capital
Net working capital = Current assets – Current liabilities
Net working capital = $950,000 – $520,000
Net working capital = $430,000
b.) what is the indication of the computed net working capital?
The computed net working capital shows that all current liabilities are to be
settled, the company would still have $430,000 left to continue its operations. Thus, this
indicates that the company has enough current assets to meet its current liabilities.
Problem 3. Free Cash Flow
FCF = EBIT (1 – tax rate) +Depreciation and Amortization + Capital Expenditure and Change in
NOWC)
Free Cash Flow = 45,000,000 ( 1 – 0.40) 27,000,000
Depreciation 12,000,000
Less:
CAPEX (18,000,000)
Change in Net Operating Working Capital (6,000,000) (24,000,000)
FCF = 15,000,000
Problem 4. Statement of Cash Flow
Class Exercise Pty Ltd
Statement of Cash Flows for Year ended June 30, 2006
Cash Flows from Operating Activities
Receipts from customers 388,000
Payments to Suppliers (304,200)
Interest Paid (9,200)
Income Tax Paid (15,000)
Net Cash Provided from Operating Activities 59,600

Cash Flows from Investing Activities

Disposal of old equipment 16,000
Purchase of new equipment (66,700)
Net Cash Provided from Investing Activities (50,700)

Cash Flows Provided from Financing Activities

Proceeds from Share Issuance 20,000
Repayment of Loan (25,000)
Dividend Paid (22,500)
Net Cash Provided from Financing Activities (27,500)
NET DECREASE IN CASH (18,600)
Beginning Cash balance 73,800
Ending Cash balance 55,200