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Finance Ch. 5 Solutions

# Interest paid 1235 income taxes paid 4767 net cash

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Interest paid (1,235) Income taxes paid (4,767) Net cash provided by operating activities 12,998 CASH FLOWS FROM INVESTMENTS Payment for purchases of property plant and equipment (7,856) \$22,856  20,000 + 5,000 Net cash used for investing activities (7,856) CASH FLOWS FROM FINANCING Paid to retire bonds (500) External financing needed 321 Div. paid (3,819) Net cash used for financing activities (3,998) Net increase (decrease) in cash 1,144 Cash and equivalents, beginning of year 8,000 Cash and equivalents, end of year \$9,144 To cash provided by operations NI \$ 8,854 Add back: Depreciation 5,000 Subtract: Increase in A/R (1,432) 11,432 10,000 Inventories (856) 6,856 6,000 Add: Increase in Accounts payable 1,000 8,000 7,000 Accrued payables 432 3,432 3,000 Net cash provided by operations \$12,998 16) (1)Forecast sales : given as \$650,000. (2) Classify accounts : given in items (1)(4) (a) Variable : all of cost of goods sold, \$30,000 of operating expenses, all of depreciation expense. (b)Fixed : remaining \$45,000 of operating expenses. (c)Spontaneous : all of cash, accounts receivable, inventories, net plant, accounts payable, and accrued payables. (d) Discretionary : marketable securities, bonds payable, and common stock. (3) (a) Variable costs

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CGS: 350,000 = .70 500,000 Op. exp: 30,000 = .06 500,000 Depreciation exp: 20,000 = .04 500,000 (b) Spontaneous accounts Cash: 25,000 = 5.00% 500,000 A/R: 50,000 = 10.00% 500,000 Inventories: 85,000 = 17.00% 500,000 Net plant: 200,000 = 40.00% 500,000 Accounts payable: 60,000 = 12.00% 500,000 Accrued payables: 35,000 = 7.00% 500,000 (c) Other Interest rate: 20,000 = 14.29% 140,000 Tax rate: 12,250 = 35.00% 35,000 Div. payout ratio: 10,000 = 43.96% 22,750 (4) (a) Variable costs CGS: 70%(\$650,000) = \$455,000 Variable operating expense: 6%(\$650,000) = \$39,000 Total operating expense = \$39,000 + \$45,000 = \$84,000 Depreciation expense: 4%(\$650,000) = \$26,000 (b) Spontaneous accounts Cash: 5.00%(\$650,000) = \$ 32,500 Accounts receivable: 10.00%(\$650,000) = 65,000 Inventories: 17.00%(\$650,000) = 110,500 Net plant: 40.00%(\$650,000) = 260,000 A/P: 12.00%(\$650,000) = 78,000 Accrued payables: 7.00%(\$650,000) = 45,500 (c) Other Interest expense: 14.29%(\$130,000) = \$18,577 (5) Pro-forma income statement For the year ending 12/31/12
Sales \$650,000 forecast  Cost of goods sold 455,000 projection Gross profit 195,00  Operating expenses \$84,000 projection  Depreciation 26,000 projection 110,000 EBIT 85,000  Interest expense 18,577 projection EBT 66,423  Tax Expense 23,248 calculation EAT \$ 43,175  Dividends 18,980 calculation

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Addition to retained earnings \$ 24,195 Proforma Balance Sheet December 31, 2012 Cash \$ 32,500 projection Marketable securities 10,000 discretionary Accounts receivable 65,000 projection Inventories 110,500 projection Plant, net 260,000 projection TA \$478,000 A/P 78,000 projection Accrued payables 45,500 projection Bonds payable 130,000 projection Common stock 105,000 discretionary RE 54,195 412,695 External financing needed
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Interest paid 1235 Income taxes paid 4767 Net cash provided...

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