Question

Student ID / Passport No. ities of count Tapet 6. Sheffield Co., shows the following information on its 2010 Income statement sales $153,000; costs = 581.900; other expenses $5.200; depreciation expense - $10,900,interest expense 58,400; taxes = 516,330; dividends = 57,200. In addition, you're told that the firm issued $2,600 in new equity during 2010, and redeemed 3.900 in outstanding long-term debt. a. What is the 2010 operating cash flow?(3%) b. What is the 2010 cash flow to creditors? (3%) c. What is the 2010 cash flow to stockholders? (396) d. If net fixed assets increased by $20.250 during the year, what was the addition to NWC (396) Full image (5M) IL Test on Chapter Three (40%) 1. If Mudvayne, Inc., has a 9 percent ROA and a 15 percent payout ratio, what is its internal growth rate? (5%) 2. If the Crash Davis Driving School has a 13.1 percent ROE and a 30 percent payout ratio, what is its sustainable growth rate? (5%)

Answer 1

6]	Sales	$      1,53,000
	-Costs	$         81,900
	-Other expenses	$           5,200
	-Depreciation expense	$         10,900
	=EBIT	$         55,000
	-Interest	$           8,400
	=EBT	$         46,600
	-Taxes	$         16,330
	=Net income	$         30,270
	Operating cash flow = EBIT+Depreciation-Taxes = 55000+10900-16330 =	$         49,570
b]	Cash flow to creditors = Interest expense+(Beginning LT loan-Ending LT loan) = 8400+3900 =	$         12,300
c]	Cash flow to stockholders = Dividends+(Beginning equity-Ending equity) = 7200-2600 =	$           4,600
d]	Cash flow from assets = Cash flow to creditors+Cash flow to stockholders
	CFFA = 12300+4600 =	$         16,900
	CFFA = OCF-Change in NFA-Change in NWC
	Substituting available figures in the
	above equation, we have
	16900 = 49570-20250-Change in NWC
	Addition to NWC = 49570-20250-16900 =	$         12,420
II]
1]	IGR = ROA*b/(1-ROA*b), where b
	is the retention ratio = 0.09*0.85/(1-0.09*0.85) =	8.28%
2]	SGR = ROE*b/(1-ROE*b) = 0.131*0.7/(1-0.131*0.7) =	10.10%