The December 31, 2015, partial financial statements taken from the annual report for AT&T Inc. (T ) follow.
Consolidated Statements of Income | ||
---|---|---|
Dollars in millions except per share amounts | 2015 | 2014 |
Operating revenues | ||
Service | $ 131,677 | $ 118,437 |
Equipment | 15,124 | 14,010 |
Total operating revenues | 146,801 | 132,447 |
Operating expenses | ||
Equipment | 19,268 | 18,946 |
Broadcast, programming and operations | 11,996 | 4,075 |
Other cost of services (exclusive of depreciation and amortization show separately below) | 35,782 | 37,124 |
Selling, general and administrative | 32,954 | 39,697 |
Abandonment of network assets | -- | 2,120 |
Depreciation and amortization | 22,016 | 18,273 |
Total operating expenses | 122,016 | 120,235 |
Operating income | 24,785 | 12,212 |
Other income (expense): | ||
Interest expense | (4,120) | (3,613) |
Equity in net income of affiliates | 79 | 175 |
Other income (expense) - net | (52) | 1,581 |
Total other income (expense) | (4,093) | (1,857) |
Income before income taxes | 20,692 | 10,355 |
Income tax expense | 7,005 | 3,619 |
Net income | $ 13,687 | $ 6,736 |
Consolidated Balance Sheets -- Liabilities and Equity Sections | ||
---|---|---|
Dollars in millions except per share amounts, December 31 | 2015 | 2014 |
Current liabilities | ||
Debt maturing within one year | $ 7,636 | $ 6,056 |
Accounts payable and accrued liabilities | 30,372 | 23,592 |
Advanced billed and customer deposits | 4,682 | 4,105 |
Accrued taxes | 2,176 | 1,091 |
Dividends payable | 2,950 | 2,438 |
Total current liabilities | 47,816 | 37,282 |
Long-term debt | 118,515 | 75,778 |
Deferred credits and other noncurrent liabilities: | ||
Deferred income taxes | 56,181 | 38,436 |
Post employment benefit obligation | 34,262 | 37,079 |
Other noncurrent liabilities | 22,258 | 17,989 |
Total deferred credits and other noncurrent liabilities | 112,701 | 93,504 |
Stockholders' equity | ||
Common stock ($1 par value, 14,000,000,000 authorized atDecember 31, 2015 and 2014; issued 6,495,231,088 atDecember 31, 2015 and 2014) | 6,495 | 6,495 |
Additional paid-in capital | 89,763 | 91,108 |
Retained earnings | 33,671 | 31,081 |
Treasury stock (350,291,239 at December 31, 2015 and1,308,318,131 at December 31, 2014, at cost) | (12,592) | (47,029) |
Accumulated other comprehensive income | 5,334 | 8,061 |
Noncontrolling interest | 969 | 554 |
Total stockholders' equity | 123,640 | 90,270 |
Total liabilities and stockholders' equity | $ 402,672 |
$296,834 |
Consolidated Statements of Stockholders' Equity -- Excerpts | 2015 | |
---|---|---|
Amount in millions except per share amounts, December 31 | Shares | Amounts |
Common Stock | ||
Balance at beginning of year | 6,495 | $ 6,495 |
Issuance of stock | -- | -- |
Balance at end of year | 6,495 | $ 6,495 |
Additional Paid-In-Capital | ||
Balance at beginning of year | $ 91,108 | |
Issuance of treasury stock | (1,597) | |
Share-based payments | 252 | |
Change related to acquisition of interests held by noncontrolling owners | -- | |
Balance at end of year | $ 89,763 | |
Retained Earnings | ||
Balance at beginning of year | $31,081 | |
Net income attributable to AT&T ($2.37, $1.24 and $3.42 per diluted share)) | 13,345 | |
Dividends to stockholders ($1.89, $1.85 and $1.81 per share) | (10,755) | |
Balance at end of year | $ 33,671 | |
Treasury stock | ||
Balance at beginning of year | (1,308) | $(47,029) |
Repurchase of common stock | (8) | (278) |
Issuance of treasury stock | 966 | 34,715 |
Balance at end of year | (350) | $(12,592) |
(a) How much interest expense did AT&T incur during
2015?
(b) What is the book value of AT&T's interest-bearing debt at
the end of 2015?
At the beginning of 2015?
Average debt for 2015? (Round to the nearest whole number)
(c) Estimate AT&T's 2015 pretax cost of debt capital.
Round your answer to one decimal place.
(d) Estimate AT&T's 2015 effective (that is, average) tax rate from information in its income statement.
Round your answer to one decimal place.
(e) Using your rounded answer from (c) above, estimate AT&T's 2015 after-tax cost of debt capital. The company's statutory tax rate is: 37%.
Round your answer to one decimal place.
(a). Interest expense for 2015 is $ 4120 million.
(b). Interest bearing debt means , the amout which company borrowed as short term and/or long term debt it can be from finnacial institiutions, from Hire purchase, from related party and from anyone one on which we paid int against that amount.
In this scenario in 2015 begining we have a debt of ($ 6,056 + $ 75,778) = $ 81,834 milion and
At the end of 2015 we have a debt of ($ 7,636 + $ 118,515) = $ 126,151 million
Average debt = (opening debt + closing debt) / 2 = (2015 + 2016) / 2 which is ($ 81,834 + $ 126,151) / 2 = $ 200,349 / 2 = $ 100,174.50 million
(c) . Pre-tax cost of debt is also sometime referenced as the effective interest rate. it's not widely used, since the effective interest paid is tax deductible.
Pre Tax cost of debt capital = Total Interest payments / Total outstanding debt
Total interest Paid in 2015 = $ 4,120 million.
Total Outstanding debt = ( $ 7,636 + $ 1,18,515 ) = $1,26,151 million.
Cost of Debt = 4,120 / 1,26,151 = 3.3% (Approx)
(d). Average tax rate = Total income tax paid / Income before income tax.
Total income tax paid during 2015 = $ 7,005 million.
Total income before income tax for 2015 = $ 20,692 million.
Average rate of tax for 2015 = 7,005 / 20,692 = 33.9 %
(e). Cost of debt = 3.3 % (From point C )
Rate of tax given = 37 %
Post tax cost of debt capital = (1 - Tax rate ) * Pre tax cost of debt.
= (1 - 0.37 ) * 0.033 = 0.02079 = 2.1%
The December 31, 2015, partial financial statements taken from the annual report for AT&T Inc. (T...
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