1. Company ABC has sales of $1,850,000, cost of goods sold of $1,000,000, EBIT of $350,000,...
1. Company ABC has sales of $1,850,000, cost of goods sold of $1,000,000, EBIT of $350,000, interest expense of $65,000, and a tax rate of 27%. If the company paid $51,000 in dividends what is the addition to retained earnings.
2. Nitro Enterprise had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a combined book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending?
3. Use the Income Statement and Balance Sheet below to calculate the companies free cash flow.
|
Income Statement |
2017 |
|
Net Sales |
675 |
|
Cost of goods sold |
210 |
|
Depreciation |
50 |
|
EBIT |
415 |
|
Interest Paid |
15 |
|
EBT |
400 |
|
Taxes (30%) |
120 |
|
Net Income |
280 |
|
Dividends |
105 |
|
Addition to Retained Earnings |
175 |
|
Assets |
2016 |
2017 |
Liabilities and Shareholders equity |
2016 |
2017 |
|
Current Assets |
Current Liabilities |
||||
|
Cash |
100 |
125 |
Accounts Payable |
200 |
250 |
|
Accounts Receivable |
250 |
350 |
Notes Payable |
150 |
225 |
|
Inventory |
400 |
375 |
|||
|
Total Current Assets |
750 |
850 |
Total Current Liabilities |
350 |
475 |
|
Long term debt |
300 |
250 |
|||
|
Fixed Assets |
Stockholders equity |
||||
|
PPE |
1500 |
1700 |
Common stock |
300 |
300 |
|
Accumulated Depreciation |
400 |
450 |
Retained earnings |
900 |
1075 |
|
Net PPE |
1100 |
1250 |
Total Shareholder’s Equity |
1200 |
1375 |
|
Total Assets |
1850 |
2100 |
Total Liabilities & Equity |
1850 |
2100 |
4. A firm has net working capital of $700. Long-term debt is $5,000, total assets are $7,800, and fixed assets are $3,850. What is the amount of the total liabilities?
Homework Answers
Answer 1.
Taxable Income = EBIT - Interest Expense
Taxable Income = $350,000 - $65,000
Taxable Income = $285,000
Net Income = Taxable Income * (1 - Tax)
Net Income = $285,000 * (1 - 0.27)
Net Income = $208,050
Addition to Retained Earnings = Net Income - Dividends
Addition to Retained Earnings = $208,050 - $51,000
Addition to Retained Earnings = $157,050
Answer 2.
Net Capital Spending = Ending Net Fixed Assets + Depreciation -
Beginning Net Fixed Assets
Net Capital Spending = $209,411 + $42,822 - $218,470
Net Capital Spending = $33,763
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