South Sea Baubles has the following (incomplete) balance sheet and income statem
ID: 2808706 • Letter: S
Question
South Sea Baubles has the following (incomplete) balance sheet and income statement.
a&b. What is shareholders’ equity in 2015 and 2016? (Enter your answers in millions.)
c&d. What is net working capital in 2015 and 2016? (Enter your answers in millions.)
e. What are taxes paid in 2016? Assume the firm pays taxes equal to 35% of taxable income. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
f. What is cash provided by operations during 2016? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
g. Net fixed assets increased from $920 million to $1,020 million during 2016. What must have been South Sea’s gross investment in fixed assets during 2016? (Enter your answer in millions.)
BALANCE SHEET AT END OF YEAR (Figures in $ millions) Assets 2015 2016 Liabilities and Shareholders' Equity 2015 2016 Current assets $ 102 $ 200 Current liabilities $ 74 $ 96 Net fixed assets 920 1,020 Long-term debt 660 870Explanation / Answer
a. the shareholder's equity in 2015 is :
2015 : total assets - total liabilities
= $1022 - $734
= $288 million
b.in 2016,
total assets - total liabilities
= $1220 - $966
= $254
c. net working capital in 2015:
CURRENT ASSETS - CURRENT LIABILITIES
=$102 - $74
= $ 28
d.in 2016:
net working captal = $104
e. the taxes paid in 2016 is :
Revenue : $2010
less: cost of goods sold : $1090
gross profit : $920
less depreciation : $410
EBIT : $510
LESS: interest expense: $252
EBT: $258
LESS TAXES : $ 90.3
NET INCOME : $167.7
THE TAXES PAID ARE : $90.3 MILLION
F. THE CASH PROVIDED BY OPERATIONS:
NET INCOME + DEPRECIATION - INCREASE IN WORKING CAPITAL
= 167.7 + 410 - 76 ( 104 - 28)
= $501.7 MILLION
G. GROSS FIXED ASSETS = INCREASE IN NET FIXED ASSETS + DEPRECIATION
= 100 + 410
= $510 MILLION
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