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Bus361, winter 2009, Solutions to the sugessted probllems of chapter 3

# Bus361, winter 2009, Solutions to the sugessted probllems of chapter 3

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Chapter 3 Financial Statements, Cash Flow, and Taxes Solutions to the Suggested Problems 3-1 NI = \$3,000,000; EBIT = \$6,000,000; T = 40%; Interest = ? Need to set up an income statement and work from the bottom up. EBIT \$6,000,000 Interest    1,000,000     EBT \$5,000,000 EBT =  Taxes (40%)   2,000,000 NI \$3,000,000 Interest = EBIT – EBT = \$6,000,000 – \$5,000,000 = \$1,000,000. 3-2 EBITDA = \$7,500,000; NI = \$1,800,000; Int = \$2,000,000; T = 40%; DA = ? EBITDA \$7,500,000 DA    2,500,000     EBITDA – DA = EBIT; DA = EBITDA – EBIT EBIT \$5,000,000 EBIT = EBT + Int = \$3,000,000 + \$2,000,000 Int   2,000,000 (Given) EBT \$3,000,000 Taxes (40%)   1,200,000 NI \$1,800,000 (Given) 3-3 NI = \$3,100,000; DEP = \$500,000; AMORT = 0; NCF = ? NCF = NI + DEP and AMORT = \$3,100,000 + \$500,000 = \$3,600,000. 3-4 NI = \$50,000,000; R/E Y/E  = \$810,000,000; R/E B/Y  = \$780,000,000; Dividends = ? R/E B/Y  + NI – Div = R/E Y/E \$780,000,000 + \$50,000,000 – Div= \$810,000,000 \$830,000,000 – Div = \$810,000,000 \$20,000,000 = Div. 6 . 0 \$3,000,000 T) (1 \$3,000,000 = - 6 . 0 000 , 800 , 1 \$ ) T 1 ( 000 , 800 , 1 \$ = -

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3-8 EBIT = \$750,000; DEP = \$200,000; AMORT = 0; 100% Equity; T = 40%; NI = ?; NCF = ?;
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