Accounting

SOLUTIONS TO END-OF-CHAPTER PROBLEMS

2-1NI = $3,000,000; EBIT = $6,000,000; T = 40%; Interest = ?
Need to machinate up an income statement and work from the bottom up.

EBIT$6,000,000
Interest 1,000,000
EBT$5,000,000EBT =
Taxes (40%) 2,000,000
NI$3,000,000

Interest = EBIT - EBT = $6,000,000 - $5,000,000 = $1,000,000.

2-2NI = $3,100,000; DEP = $500,000; dejected = 0; NCF = ?
NCF = NI + DEP and amort = $3,100,000 + $500,000 = $3,600,000.

2-3EBIT = $170,000; Operating capital = $800,000; kA-T = 11.625%; T = 40%;
EVA = ?

EVA = EBIT(1 - T) - AT sawbuck cost of capital
= $170,000(1 - 0.4) ($800,000 ? 0.11625)
= $102,000 - $93,000
= $9,000.

2-4NI = $50,000,000; R/EY/E = $810,000,000; R/EB/Y = $780,000,000; Dividends = ?

R/EB/Y+NIDiv=R/EY/E
$780,000,000+$50,000,000Div=$810,000,000
$830,000,000Div=$810,000,000
$20,000,000=Div.

2-5EBITDA = $7,500,000; NI = $1,800,000; Int = $2,000,000; T = 40%; DA = ?

EBITDA$7,500,000
DA 2,500,000EBITDA DA = EBIT; DA = EBITDA EBIT
EBIT$5,000,000EBIT = EBT + Int = $3,000,000 + $2,000,000
Int 2,000,000(Given)
EBT$3,000,000
Taxes (40%) 1,200,000
NI$1,800,000(Given)


2-6EBIT = $750,000; DEP = $200,000; AMORT = 0; 100% Equity; T = 40%; NI = ?; NCF = ?; OCF = ?





First, determine net income by setting up an income statement:
EBIT$750,000
Interest 0
EBT$750,000
Taxes (40%) 300,000
NI$450,000

NCF = NI + DEP and AMORT = $450,000 + $200,000 = $650,000.

OCF = EBIT(1 - T) + DEP and AMORT = $750,000(0.6) + $200,000 = $650,000.

Note that NCF = OCF because the firm is 100 percent equity financed.

2-7 narrations b, c, and d will all decrease the amount of cash on a companys balance sheet, while Statement a will increase cash through the change of common stock. This is a source of cash through finance activities.

2-8a.NOPAT = EBIT(1 T)
= $4,000,000,000(0.6)
= $2,400,000,000.

b.NCF =...If you want to get a full essay, order it on our website: Ordercustompaper.com



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