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Unformatted text preview: 3-1NI = $3,000,000; EBIT = $6,000,000; T = 40%; Interest = ?Need to set up an income statement and work from the bottom up.EBIT$6,000,000Interest 1,000,000 EBT$5,000,000EBT = Taxes (40%) 2,000,000NI$3,000,000Interest = EBIT EBT = $6,000,000 $5,000,000 = $1,000,000.3-2Sales = $20,000,000; Operating costs (excl. deprec.) = $12,500,000; NI = $1,800,000; Int = $2,000,000; T = 40%; Deprec. = ?Sales$20,000,000Op. costs (ex. deprec.)12,500,000Deprec. 2,500,000 Sales Op. costs Deprec. = EBITEBIT$ 5,000,000EBIT = EBT + Int = $3,000,000 + $2,000,000Interest 2,000,000(Given)EBT$ 3,000,000Taxes (40%) 1,200,000NI$ 1,800,000(Given)3-3NI = $50,000,000; R/EY/E = $810,000,000; R/EB/Y = $780,000,000; Dividends = ?R/EB/Y + NI Div= R/EY/E$780,000,000 + $50,000,000 Div = $810,000,000$830,000,000 Div= $810,000,000$20,000,000= Div.3-4Statements b and d will decrease the amount of cash on a companys balance sheet. Statement a will increase cash through the sale of common stock. Selling stock provides cash through financing activities. On one hand, Statement c would decrease cash; however, it is also possible that Statement c would increase cash, if the firm receives a tax refund.Chapter 3: Financial Statements, Cash Flow, and TaxesAnswers and Solutions1Solutions to End-of-Chapter Problems3-5 Ending R/E= Beg. R/E + Net income - Dividends$278,900,000 = $212,300,000 + Net income - $22,500,000$278,900,000 = $189,800,000 + Net income Net income = $89,100,000.3-6a.From the statement of cash flows the change in cash must equal cash flow from operating activities plus long-term investing activities plus financing activities. First, we must identify the change in cash as follows:Cash at the end of the year$25,000 Cash at the beginning of the year 55,000Change in cash...
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