Final answer:
a. The 2018 cash flow to stockholders is $48,670. b. The addition to Net Working Capital (NWC) is unknown without the value of Change in Total Current Assets (TCA).
Step-by-step explanation:
a. To calculate the cash flow to stockholders, we need to subtract the dividends paid and the change in long-term debt from the net income. The formula for cash flow to stockholders is:
Cash Flow to Stockholders = (Net Income + Depreciation Expense) - (Dividends + Change in Long-term Debt)
Using the information given:
Net Income = Sales - Costs - Other expenses - Depreciation expense - Interest expense - Taxes
Change in Long-term Debt = Redemption of Outstanding Debt - Issuance of New Equity
Substituting the values:
Net Income = $202,000 - $87,000 - $5,600 - $8,900 - $14,700 - $30,030 = $55,770
Change in Long-term Debt = -$9,400 - $7,800 = -$17,200
Therefore, the cash flow to stockholders is:
Cash Flow to Stockholders = ($55,770 + $8,900) - ($9,800 + (-$17,200)) = $48,670
b. To determine the addition to Net Working Capital (NWC), we need to subtract the change in Net Fixed Assets (NFA) from the change in Total Current Assets (TCA). The formula for calculating NWC is:
NWC = TCA - NFA
Using the information given:
Change in TCA = ?
Change in NFA = $24,000
Since the change in NWC is equal to the change in TCA minus the change in NFA, we can rearrange the formula:
Change in TCA = Change in NWC + Change in NFA
Substituting the values:
Change in TCA = ? + $24,000
Therefore, the addition to NWC is unknown without the value of Change in TCA.