ps1sol - Problem Set#1 Solutions 1 To find owners equity we...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Problem Set #1 – Solutions 1. To find owner’s equity, we must construct a balance sheet as follows: Balance Sheet CA $4,000 CL $3,400 NFA 22,500 LTD 6,800 OE ?? TA $26,500 TL & OE $26,500 We know that total liabilities and owner’s equity (TL & OE) must equal total assets of $26,500. We also know that TL & OE is equal to current liabilities plus long-term debt plus owner’s equity, so owner’s equity is: OE = $26,500 – 6,800 – 3,400 = $16,300 NWC = CA – CL = $4,000 – 3,400 = $600 2. The income statement for the company is: Income Statement Sales $634,000 Costs 305,000 Depreciation 46,000 EBIT $283,000 Interest 29,000 EBT $254,000 Taxes(35%) 88,900 Net income $165,100 8. To calculate OCF, we first need the income statement: Income Statement Sales $14,200 Costs 5,600 Depreciation 1,200 EBIT $7,400 Interest 680 Taxable income $6,720 Taxes (35%) 2,352 Net income $4,368 OCF = EBIT + Depreciation – Taxes = $7,400 + 1,200 – 2,352 = $6,248 14. To find the OCF, we first calculate net income. Income Statement
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Sales $162,000 Costs 93,000 Depreciation 8,400 Other expenses 5,100 EBIT $55,500 Interest 16,500 Taxable income $39,000 Taxes (34%) 14,820 Net income $24,180 Dividends $9,400 Additions to RE $14,780 a. OCF = EBIT + Depreciation – Taxes = $55,500 + 8,400 – 14,820 = $49,080 b.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern