1.)Company ABC has sales of $1,650,000, cost of goods sold of $600,000, EBIT of $450,000, interest...

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Question

1.)Company ABC has sales of $1,650,000, cost of goods sold of $600,000, EBIT of $450,000, interest...

1.)Company ABC has sales of $1,650,000, cost of goods sold of $600,000, EBIT of $450,000, interest expense of $70,000, and a tax rate of 27%. If the company paid $57,000 in dividends what is the addition to retained earnings.

2.)At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?

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 $900. Long-term debt is $4,200, total assets are $8,000, and fixed assets are $4,300. What is the amount of the total liabilities?

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Answer 1

Answer #1

Answer to Question 1:

Net Income = (EBIT - Interest Expense) * (1 - tax)
Net Income = ($450,000 - $70,000) * (1 - 0.27)
Net Income = $277,400

Addition to Retained Earnings = Net Income - Dividends
Addition to Retained Earnings = $277,400 - $57,000
Addition to Retained Earnings = $220,400

Answer to Question 2:

NWC, beginning of the year = Current Assets, beginning of the year - Current Liabilities, beginning of the year
NWC, beginning of the year = $121,306 - $124,509
NWC, beginning of the year = -$3,203

NWC, end of the year = Current Assets, end of the year - Current Liabilities, end of the year
NWC, end of the year = $122,418 - $103,718
NWC, end of the year = $18,700

Change in NWC = NWC, end of the year - NWC, beginning of the year
Change in NWC = $18,700 - (-$3,203)
Change in NWC = $21,903

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Answer 2

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1.)Company ABC has sales of $1,650,000, cost of goods sold of $600,000, EBIT of $450,000, interest...

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Add Answer to: 1.)Company ABC has sales of $1,650,000, cost of goods sold of $600,000, EBIT of $450,000, interest...

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