h1 - Problem Set #1 Solutions 1. To find owner's equity, we...

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Problem Set #1 – Solutions 1. To find owner’s equity, we must construct a balance sheet as follows: Balance Sheet CA $4,000 CL $3,400 NFA 22,500 LTD 6,800 OE ?? TA $26,500 $26,500 We know that total liabilities and owner’s equity (TL & OE) must equal total assets of $26,500. We also know that TL & OE is equal to current liabilities plus long-term debt plus owner’s equity, so owner’s equity is: OE = $26,500 – 6,800 – 3,400 = $16,300 NWC = CA – CL = $4,000 – 3,400 = $600 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 8. To calculate OCF, we first need the income statement: Income Statement Sales $14,200 Costs 5,600 Depreciation 1,200 EBIT $7,400 Interest 680 Taxable income $6,720 Taxes (35%) 2,352 Net income $4,368 OCF = EBIT + Depreciation – Taxes = $7,400 + 1,200 – 2,352 = $6,248 14. To find the OCF, we first calculate net income.
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This note was uploaded on 07/21/2009 for the course BUAD 306 taught by Professor Selvili during the Spring '07 term at USC.

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h1 - Problem Set #1 Solutions 1. To find owner's equity, we...

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