# 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 =
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