Part (a)
Please see the table below. All financials are in $ mn. Please see the second column titled "Linkage" That will help you understand the mathematics. Dividends paid and addition to retained earnings appear as last two rows highlighted in yellow color in the table.
Income Statement for 2020 | ||
Parameter | Linkage | $ mn |
Revenues | A | 880 |
[-] Operating expenses excluding depreciation | B = 85% x A | 748 |
[-] Depreciation | C = 10% x 300 | 30 |
Operating income | D = A - B - C | 102 |
[-] Interest expenses | E | 22 |
Earnings before taxes | F = D - E | 80 |
[-] Taxes | G = 25% x F | 20 |
Net income | H = F - G | 60 |
[-] Dividends paid | I = 40% x H | 24 |
Addition to retained earnings | J = H - I | 36 |
Part (b)
Missing figures in the balance sheet (though you seem to have completed the balance sheet yourself because there is no missing figure under 2020 in the attached picture of the question).
Common stock = Closing balance of 2019 + fresh issuance of equity = 249 + 36 = 285
Retained earnings = Closing balance from 2019 + addition to the retained earnings for 2020 calculated in part (a) above = 110 + 36 = 146
Total common equity = sum of the above two items = 285 + 146 = 431
Total liabilities & equity = total liabilities + total equity = 369 + 431 = 800
Part (c)
Please see the table below for cash flow statement for 2020. While reading the table:
Parameter | $ mn | |
Net income | 60 | |
[+] Depreciation | 30 | |
[-] Increase in receivables | -20 | |
[-] increase in inventory | 68 | |
[+] increase in accounts payable | 9 | |
[+] Increase in accruals | -11 | |
Cash flow from operations | 40 | |
[-] Investments | 4 | |
[-] Capital expenditure | 68 | |
Cash flow from investing activities | -72 | |
Fresh debt | 39 | |
[-] Repayment of notes | 9 | |
[+] Fresh equity issuance | 36 | |
[-] Dividends paid | 24 | |
Cash flows from financing activities | 42 | |
Net Cash flows during the year | 10 | |
[+] Opening cash balance | 60 | |
Closing cash balance | 70 |
Begin with the partial model in the file Ch02 P20 Build a Model.xlsx on the textbook's...
Begin with the partial model in the file Ch02 P14
Build a Model.xlsx on the textbook’s Web site.
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