{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Solutions+Problem+Set+1

# Solutions+Problem+Set+1 - E120 Principles of Engineering...

This preview shows pages 1–2. Sign up to view the full content.

E120 Principles of Engineering Economics Fall 2010 Problem Set #1 Solutions 1. To find shareholders’ equity, we must construct a balance sheet as follows: Balance Sheet CA \$5,100 CL \$4,300 NFA 23,800 LTD 7,400 SE ?? TA \$28,900 TL & SE \$28,900 We know that total liabilities and shareholders’ equity (TL & SE) must equal total assets of \$28,900. We also know that TL & SE is equal to current liabilities plus long-term debt plus shareholders’ equity, so shareholders’ equity is: SE = \$28,900 – 7,400 – 4,300 = \$17,200 NWC = CA – CL = \$5,100 – 4,300 = \$800 2. The income statement for the company is: Income Statement Sales \$586,000 Costs 247,000 Depreciation 43,000 EBIT \$296,000 Interest 32,000 EBT \$264,000 Taxes(35%) 92,400 Net income \$171,600 3. To find the book value of current assets, we use: NWC = CA – CL. Rearranging to solve for current assets, we get: CA = NWC + CL = \$380,000 + 1,400,000 = \$1,480,000 The market value of current assets and fixed assets is given, so: Book value CA = \$1,480,000 Market value CA = \$1,600,000 Book value NFA = \$3,700,000 Market value NFA = \$4,900,000 Book value assets = \$5,180,000 Market value assets = \$6,500,000 4. To calculate the operating margin and net profit margin, we first need the income statement:

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Income Statement Sales \$27,500 Costs 13,280 Depreciation 2,300 Operating income \$11,920 EBIT \$11,920 Interest 1,105
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}