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RWJ HW C2

# RWJ HW C2 - 2 The income statement for the company is...

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1d50ce82fdb07e964166220ed14f53bcc92e9f75.doc 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 6. Taxes = 0.15(\$50K) + 0.25(\$25K) + 0.34(\$25K) + 0.39(\$325 – 100K) = \$110,000 10. Change in NWC = NWC end – NWC beg Change in NWC = (CA end – CL end ) – (CA beg – CL beg ) Change in NWC = (\$1,650 – 920) – (\$1,400 – 870) Change in NWC = \$730 – 530 = \$200 14. To find the OCF, we first calculate net income. Income Statement 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. CFC = Interest – Net new LTD = \$16,500 – (–6,400) = \$22,900 Note that the net new long-term debt is negative because the company repaid part of its longterm debt. c. CFS = Dividends – Net new equity = \$9,400 – 7,350 = \$2,050 d. We know that CFA = CFC + CFS, so: CFA = \$22,900 + 2,050 = \$24,950 CFA is also equal to OCF – Net capital spending – Change in NWC. We already know OCF.

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RWJ HW C2 - 2 The income statement for the company is...

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