Instructor key — Module 5: Constructing the Normalized 3-Statement Operating Model
Instructor/solutions version. Keep separate from the student assignment during assessment.
Calculation solution
Net income $150,000, DA $55,000, NWC investment $35,000, CapEx $65,000, principal $30,000, distributions $20,000 and opening cash $90,000. Calculate ending cash.
Calculated result: 145,000.00000000 (actual USD, except where the question requests a ratio or return). OCF is $170,000, change in cash $55,000; interest and taxes are already in net income. Use appropriate display rounding while retaining formula precision. This result is generated from the independent assignment inputs, not copied from the chapter answer.
Conceptual and judgment marking
A complete conceptual response identifies the measure's economic purpose, the defined perimeter and the risk of confusing it with another metric. Award up to 20 points for explanation, not terminology alone. For the applied question, award up to 15 for linking evidence to a concrete acquisition consequence; do not require an optimistic recommendation.
Spreadsheet marking
Award 15 of the 30 spreadsheet points for live links from assumptions, 10 for a coherent 10% mutation and predicted direction, and 5 for units, readable formatting and checks. Inspect formulas directly rather than accepting cached numbers. Use the instructor workbook for the controlling capstone model; this independent lab uses different inputs.
Calculation marking: 10 points for the correct equation/perimeter, 15 for intermediate arithmetic, and 10 for result, units and rounding. Overall pass requires 80 and all critical checks in the student version.
Original chapter practice solutions
The following solutions were moved out of the chapter so full answers no longer sit immediately below student questions. Match them in order to the chapter's practice problems.
Worked solution: OCF is $323,100 + $160,000 − $32,000 = $451,100. Ending cash is $200,000 + $451,100 − $220,000 − $100,000 − $120,000 = $211,100. Debt is $700,000 − $100,000 = $600,000. Equity is $1,040,000 + $323,100 − $120,000 = $1,243,100. Each result arises from a roll-forward, not a residual selected to force balance.
Worked solution: Cash rises $120,000 to $331,100, and equity rises $120,000 to $1,363,100. Net income and OCF remain unchanged. Assets and liabilities plus equity both increase $120,000 to $2,488,100. A model in which EBITDA changes when distributions change has incorrectly placed an equity transaction in operations.
Worked solution: Financing cash flow increases $75,000, cash becomes $286,100, and debt becomes $675,000. Both sides of the balance sheet rise $75,000. Net income and equity do not change in the stipulated year. The next year's interest schedule must include the new opening debt. If the borrowing is only hypothetical, show it as a funding requirement until available terms are established.
Worked solution: The opening balance already incorporates the historical loss. Repeating it in forecast earnings charges the same historical event to a new period. Deducting it again as a cash investment can also count a noncash recognition as new spending. Rebuild the model from the corrected opening balance, forecast actual additions and usage, and include only new losses or investments supported for Year 1.