Question

bottom question multiple choice options:

1. a. $18 b. $30 c. $12 d. $24

2. a. $9.13 b.$14.18 c. $10.63 d. $15.75

3. a.$20.44 b. $17.37 c. $11.53 d. $13.03

4. a.$5,276,250 b. $14,400,000 c. $3,750,000 d. $3,858,750

5. a. $$19,363,125 b. $6,693,281 c. $4,687,500 d. $16,668,281

6. correct/incorrect

7. all/all but one

2. Income statement The income statement, also known as the profit and loss (P&l) statoment, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm's gross income, expenses, The income statement is prepared using generally necessarily when cash was received or paid. Investors and analysts use the information given in the income statement and other financial statements and reports to net income, and the income that is available for distribution to its preferred and common using the generally accepted accounting principles (GAAP) that match the firm's revenoes and expenses to the period in which they wee revenues and expenses to the period in which they were incurred, not financial performance and condition. Consider the following scenario: Cold Goose Metal Works Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% net year 1. Cold Goose is able to achieve this level of increased sales, but its interest costs increase from 10% o 15% of earnings before interest and tates dern 2. The company's operating costs (excluding de reciation and amortization) remain at % of net sales, and its depreciation and amortization expenses rer an east r from year to year 3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2. Cold Goose expects to pay $300,000 and $1,172,601 of preferred and common stock dividends, respectively Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar Cold Goose Metal Works Ine. Income Statement for Year Ending December 31 Year 2 (Forecasted)

Answer 1

Answer: Cold Goose Metal Works Inc Income Statement for Year Ending December 31 Year 2 Year 1 Forecasted 15000000 18750000 11250000 14062500 Net Sales Less: Operating Costs, Except Depreciation and Amortization Less: Depreciation and Amortization Operating Income (or EBIT) Less: Interest Expense Pre-Tax Income (or EBT) Less: Taxes (40%) Earnings after Taxes Less: Preferred Stock Dividends Earnings available to Common Shareholders ess: Common Stock Dividends Contribution to Retained Earnings 600000 3150000 315000 2835000 708750 2126250 300000 1826250 956813 869437 600000 4087500 613125 3474375 868594 2605781 300000 2305781 1172601 1133180 ·In Year 2, if Cold Goose has 25,000 Shares of Preferred Stock issued and outstanding, then each preferred Share should expect to receive $12 ($300,000 25,000) in annual dividends. If Cold Goose has 200,000 shares of Common Stock issued and outstanding, then the firm's earnings per share is expected to change from $9.13 ($1,826,250/200,000) in Year 1 to $11.53 ($2,305,781 / 200,000) in Year 2 . Cold Goose's before Interest, Taxes, Depreciation and Amortization (EBITDA) value changed fromm $3,750,000 in Year 1 to $4,687,500 in Year 2. It is incorrect to say that Cold Goose's Net inflows and outflows of cash at the end of Years 1 and 2 are equal to the Company's annual contribution to Retained Earnings, $869,437 and $1,133,180 respectively. This is because all but one of the items reported in the Income statement involves payments and receipts of Cash