Volbeat Corp. shows the following information on its 2015 income statement: sale
ID: 2732039 • Letter: V
Question
Volbeat Corp. shows the following information on its 2015 income statement: sales = $196,000; costs = $105,000: other expenses = $7,900; depreciation expense = $14,700; interest expense = $13,900; taxes = $19,075; dividends = $11,000. In addition, you're told that the firm issued $5,400 in new equity during 2015 and redeemed $3,900 in outstanding long-term debt. What is the 2015 operating cash flow? (Do not round intermediate calculations.) What is the 2015 cash flow to creditors? (Do not round intermediate calculations.) What is the 2015 cash flow to stockholders? (Do not round intermediate calculations.) If net fixed assets increased by $25,000 during the year, what was the addition to NWC? (Do not round intermediate calculations.)Explanation / Answer
Income Statement
Sales
196,000
Less:
Costs
105,000
Other Expenses
7,900
Depreciation
14,700
EBIT
68,400
Less:Interest
13,900
Taxable Income
54,500
Less:Taxes
19,075
Net Income
35,425
Dividends
11,000
Addition to RE
24,425
a.
OCF = EBIT + Depreciation – Taxes
OCF = $68,400 + 14,700 – 19,075
OCF = $64,025
b.
CFC = Interest – Net new LTD
CFC = $13,900 – (–3,900)
CFC = $17,800
Note:net new long-term debt is negative because it repaid part of its long-term debt.
c.
CFS = Dividends – Net new equity
CFS = $11,000 – 5,400
CFS = $5,600
d.
We know that CFA = CFC + CFS, so:
CFA = $17,800 + 5,600
CFA = $23,400
CFA is also equal to OCF – Net capital spending – Change in NWC.
We already know OCF. Net capital spending is equal to:
Net capital spending = Increase in NFA + Depreciation
Net capital spending = $25,000 + 14,700
Net capital spending = $39,700
CFA = OCF Change in NWC Net capital spending
23,400=64,205- Change in NWC-39,700
23,400-64,205+39,700 = - Change in NWC
Change in NWC= 1,105
Income Statement
Sales
196,000
Less:
Costs
105,000
Other Expenses
7,900
Depreciation
14,700
EBIT
68,400
Less:Interest
13,900
Taxable Income
54,500
Less:Taxes
19,075
Net Income
35,425
Dividends
11,000
Addition to RE
24,425
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