Problem Set #1 (Extra Version)

Problem Set #1 (Extra Version) - Problem Set #1: CBA Real...

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Problem Set #1:  CBA Real Estate Management Company CBA Real Estate Management Company is in the business of buying and leasing properties and  providing facilities management services.  Its financial statements from 2009 and 2010 are as  follows (all numbers are in millions): BALANCE SHEET 2010 2009 Assets Current Assets    Cash 400 120    A/R 1200 670    Inventory 0 0       Total 1600 790 Fixed Assets    Net Plant and Equipment 3000 2300 Total Assets 4600 3090 Liabilities and Equity Current Liabilities    A/P 700 665    Notes Payable 1220 1125       Total 1920 1790 Long-Term Debt 4000 4000 Equity    Common Stock and  Paid-In 1000 1000    Retained Earnings -2320 -3700       Total -1320 -2700 Total Liabilities and Equity 4600 3090 INCOME STATEMENT 2010 2009 Revenues 8000 4000 Costs 5000 5000 Depreciation 300 300
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EBIT 2700 -1300 Interest Paid 400 400 Taxable  Income 2300 -1700 Taxes (40%) 920 0 Net Income 1380 -1700 How much leverage is the firm using?  Did its use of leverage increase or decrease between  2008 and 2009?   Normally, you could use any of the leverage ratios; however, since equity is negative, the ratios 
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Problem Set #1 (Extra Version) - Problem Set #1: CBA Real...

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