Business & Finance homework help>Management homework help

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Item4

Item 4

South Sea Baubles has the following (incomplete) balance sheet and income statement.

BALANCE SHEET AT END OF YEAR
(Figures in $ millions)
Assets20182019Liabilities and Shareholders’ Equity20182019
Current assets$104 $210 Current liabilities$78 $102 
Net fixed assets 940  1,040 Long-term debt 670  890 
INCOME STATEMENT, 2019
(Figures in $ millions)
Revenue$2,020 
Cost of goods sold 1,100 
Depreciation 420 
Interest expense 254 

a&b. What is shareholders’ equity in 2018 and 2019?

c&d. What is net working capital in 2018 and 2019?

e. What are taxes paid in 2019? Assume the firm pays taxes equal to 21% of taxable income.

f. What is cash provided by operations during 2019?

g. Net fixed assets increased from $940 million to $1,040 million during 2019. What must have been South Sea’s gross investment in fixed assets during 2019?

Complete this question by entering your answers in the tabs below.

  • Req A and B
  • Req C and D
  • Req E
  • Req F
  • Req G

What is shareholders’ equity in 2018 and 2019? (Enter your answers in millions.)

2018

_______ million

2019

_____ million

ITEM  5

The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $1,800,000 in setting up a production plant. He believes that he could sell his patent for $48 million.

a. What is the book value of the firm? (Enter your answer in dollars not in millions.)

b. What is the market value of the firm? (Enter your answer in dollars not in millions.)

c. If there are two million shares of stock in the new corporation, what would be the book value per share? (Round your answer to 2 decimal places.)

d. If there are two million shares of stock in the new corporation, what would be the price per share? (Round your answer to 2 decimal places.)

ITEM #6

Butterfly Tractors had $16.00 million in sales last year. Cost of goods sold was $8.40 million, depreciation expense was $2.40 million, interest payment on outstanding debt was $1.40 million, and the firm’s tax rate was 21%.


a.
 What was the firm’s net income? (Enter your answers in millions rounded to 2 decimal places.)

b. What was the firm’s cash flow? (Enter your answers in millions rounded to 2 decimal places.)

c. What would happen to net income and cash flow if depreciation were increased by $1.40 million? (Enter your numeric answers in millions rounded to 2 decimal places. Select “unaffected” if the results do not affect the balance.)

f. What would be the impact on cash flow if depreciation was $1.40 million and interest expense was $2.40 million? (Enter your numeric answer in millions rounded to 2 decimal places. Select “unaffected” if the results do not affect the balance.)

 
a. Net income million b. Net cash flow million c. Net income would be by million Cash flow would be by million f. Cash flow would be by million

Item 8

During the last year of operations, Theta’s accounts receivable increased by $11,000, accounts payable increased by $5,500, and inventories decreased by $2,200. What is the total impact of these changes on the difference between profits and cash flow?

 
Total impact by

ITEM 9

he following table shows an abbreviated income statement and balance sheet for Quick Burger Corporation for 2019.

INCOME STATEMENT OF QUICK BURGER CORP., 2019
(Figures in $ millions)
Net sales$27,569 
Costs 17,571 
Depreciation 1,404 
Earnings before interest and taxes (EBIT)$8,594 
Interest expense 519 
Pretax income 8,075 
Federal taxes (@ 21%) 1,696 
Net income$6,379 
 
BALANCE SHEET OF QUICK BURGER CORP., 2019
(Figures in $ millions)
  Assets2019 2018 Liabilities and Shareholders’ Equity2019 2018 
  Current assets        Current liabilities        
  Cash and marketable securities$2,338  $2,338  Debt due for repayment   $373  
  Receivables 1,377   1,337  Accounts payable$3,405   3,145  
  Inventories 124   119  Total current liabilities$3,405  $3,518  
  Other current assets   1,091   618           
  Total current assets$4,930  $4,412           
  Fixed assets        Long-term debt$13,635  $12,136  
  Property, plant, and equipment$24,679  $22,837  Other long-term liabilities 3,059   2,959  
  Intangible assets (goodwill) 2,806   2,655  Total liabilities$20,099  $18,613  
  Other long-term assets 2,985   3,101  Total shareholders’ equity 15,301   14,392  
  Total assets$35,400  $33,005  Total liabilities and shareholders’ equity$35,400  $33,005  

In 2019 Quick Burger had capital expenditures of $3,051.

a. Calculate Quick Burger’s free cash flow in 2019. (Enter your answer in millions.)

b. If Quick Burger was financed entirely by equity, how much more tax would the company have paid? (Assume a tax rate of 21%.) (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

c. What would the company’s free cash flow have been if it was all-equity financed? (Enter your answer in millions.)

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