Week 1 Homework

604 Words Jul 5th, 2016 3 Pages
Deborah Michelle Messenger
Week 1 Homework
5/8/2016

1. Calculating OCF. Hammett, Inc., has sales of $34,630, costs of $10,340, depreciation expense of $2,520, and interest expense of $1,750. If the tax rate is 35 percent, what is the operating cash flow, or OCF? a. Operating cash flow $ 17283
Sales - Cost - Dep = EBIT
34630 - 10340 - 2520 = 21770

EBIT - Interest = Taxable Income
21770 - 1750 = 20020

Taxes (35%) = 20020 x .35 = 7007

Net income: 20020 - 7007 = 13013

EBIT + dep - less taxes = OCF
21770 + 2520 - 7007 = 17283

2. Calculating Cash Flows. Weiland Co. shows the following information on its 2014 income statement: sales = $167,000; costs = $88,600; other expenses = $4,900; depreciation expense =
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If net fixed assets increased by $23,140 during the year, what was the addition to NWC? iv. Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
Cash flow from assets = $12,700 + 6,800
Cash flow from assets = $19,500

Net capital spending = Depreciation + Increase in fixed assets
Net capital spending = $11,600 + 23,140
Net capital spending = $34,740

Cash flow from assets = OCF – Change in NWC – Net capital spending
$19,500 = $54,880 – Change in NWC – $34,740 Change in NWC = $640

3. Net Income and OCF. During the year, Belyk Paving Co. had sales of $2,600,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,535,000, $465,000, and $520,000, respectively. In addition, the company had an interest expense of $245,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) f. What is Belyk’s net income? v. Belyk Paving Company
Net Sales $2,600,000
Cost of Goods Sold $1,535,000
Gross Profit $1,065,000
Selling Expense $465,000
Depreciation Operating Profit $520,000
Interest Expense $80,000
Profit Before Tax $245,000
Taxes -$165,000
Net Income $165,000 g. What is its operating cash flow? vi. Operating Profit $80,000
Depreciation Add Back $520,000
Operating Cash Flows $600,000 h. Explain your

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