RWJ HW C2 - 1d50ce82fdb07e964166220ed14f53bcc92e9f75.doc 2....

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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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This note was uploaded on 06/10/2008 for the course BUAD 660 taught by Professor Bertrand during the Summer '08 term at Redlands.

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RWJ HW C2 - 1d50ce82fdb07e964166220ed14f53bcc92e9f75.doc 2....

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