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Solutions_to_Ch._3_HW_Problems_-_Financial_Statements

Solutions_to_Ch._3_HW_Problems_-_Financial_Statements -...

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Solutions to Ch. 3 Homework Problems 3-10 a. NOPAT = EBIT(1 – T) = $4,000,000,000(0.6) = $2,400,000,000. b. NCF = NI + DEP and AMORT = $1,500,000,000 + $3,000,000,000 = $4,500,000,000. c. OCF = NOPAT + DEP and AMORT = $2,400,000,000 + $3,000,000,000 = $5,400,000,000. d. FCF = NOPAT – Net Investment in Operating Capital = $2,400,000,000 – $1,300,000,000 = $1,100,000,000. 3-11 Working   up   the   income   statement   you   can   calculate   the   new   sales   level   would   be  $12,681,482. Sales $12,681,482 $5,706,667/(1  -  0.55) Operating  costs (excl. D&A)     6,974,815 $12,681,482  ×  0.55 EBITDA $  5,706,667 $4,826,667   $880,000 Depr. & amort.        880,000 $800,000  ×  1.10 EBIT $  4,826,667 $4,166,667   $660,000 Interest        660,000 $600,000  ×  1.10 EBT $  4,166,667 $2,500,000/(1  -  0.4) Taxes (40%)     1,666,667 $4,166,667  ×  0.40 Net income $  2,500,000 3-12 a. Because we’re interested in net cash flow available to common stockholders, we exclude  common dividends paid. CF 05 = NI available to common stockholders + Depreciation and amortization = $372 + $220 = $592 million. The net cash flow number is larger than net income by the current year’s depreciation  and amortization expense, which is a noncash charge.
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