BUSN379 Homework Week 1

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BUSN379 Homework Week 1
The income statement starts with revenues and subtracts costs to arrive at EBIT…

 

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BUSN379 Homework Week 1

BUSN379 Homework Week 1

A+

Chapter 2: 8, 14, and 19

Instructions:

  • Please submit your homework using this template.
  • If you used excel for your calculations, please fill in your results in this template and submit along with your Excel sheet.
  • If you used a financial calculator, provide your inputs.
  • If you used an online calculator, provide a snapshot at all possible.
  • If you used a formula, write down your step-by-step calculations.
  • Please complete all items highlighted in yellow.
  • Note: you will not receive credit for items without calculations.

Chapter 2 Assignment                                           

  1. The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income.

Please calculate by completing the Income Statement below:

Income Statement

Sales$34,630

 

Costs$10,340
Depreciation$2520
EBIT$21,770
Interest$1,750
Taxable income$20,020
Taxes$7,007
Net income$13,013
  1. a. To calculate the OCF, we need to create an income statement. The income statement starts with sales (revenues) and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income.

Please calculate by completing the Income Statement below:

Income Statement

Sales$167,000
Costs$88,600
Other Expenses$4,900
Depreciation$11,600
EBIT$61,900
Interest$8,700
Taxable income$53,2000
Taxes$18,620
Net income$34,580
  1. The cash flow to creditors is the interest paid, minus any new borrowing. We know that $4,000 of debt were “redeemed”, so we know net borrowing changed by $4,000 (This is your net new borrowing). Since the company redeemed long-term debt, the net new borrowing is negative. So, the cash flow to creditors is:….
  2. a. The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get:

Income Statement

Sales$2,600,000
Cost of goods sold$1,535,000
Other expenses$465,000
Depreciation$520,000
EBIT$80,000
Interest$245,000
Taxable income-$165,000
Taxes (35%)$0
Net income-$165,000
  1. The operating cash flow for the year was:…
  2. Please write here your answer in essay format….