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BUSN 379 Homework Week 1-7
BUSN 379 Homework Week 1
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
- 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
|
- 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
|
- 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:….
- 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:
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