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

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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

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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.
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• Fall '08
• Selvili
• Balance Sheet, OCF, Generally Accepted Accounting Principles, NWC, Net Capital Spending

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