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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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