FUND OF CORPORATE FINANCE LL W/ACCESS
11th Edition
ISBN: 9781260076752
Author: Ross
Publisher: MCG
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Chapter 2, Problem 16QP
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Problem 19: Laiho Industries’s 2017 and 2018 balance sheets (in thousands of dollars are shown).
Please show all work, INCLUDING FORMULAS AND HOW YOU GOT EACH PIECE OF THE FORMULA.
A, B, C ARE COMPLETE. PLEASE ANSWER D, E, F.
a. Sales for 2018 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40%, and Laiho pays 40% of its net income as dividends. Given this information, construct the firm’s 2018 income statement.
b. Construct the statement of stockholders’ equity for the year ending December 31, 2018, and the 2018 statement of cash flows.
c. Calculate 2017 and 2018 net operating working capital (NWOC) and 2018 free cash flow (FCF). Assume the firm has no excess cash.
d. If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effect would this have on taxes paid by the company’s shareholders?
(Answer part D in full,…
39
Atlanta Corporation, a domestic corporation, had the following data for the years 2022 and 2023:
2022
2023
Sales
P 10,000,000
P 15,000,000
Cost of sales
4,000,000
6,000,000
Deductible expenses
6,100,000
7,000,000
Capital gains
50,000
100,000
Interest income on trade notes receivable
10,000
30,000
Rent income
430,000
600,000
Total assets
500,000,000
550,000,000
How much is the total deferred charges in 2023?
11.5 Brandywine Clinic, a not-for-profit business, had revenues of $12 million in 2016. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash.
Construct Brandywine’s 2016 income statement
What were Brandywine’s net income, total profit margin, and cash flow?
Now, suppose the company changed its depreciation calculation procedures (still within GAAP) such that its depreciation expense doubled. How would this change affect Brandywine’s net income, total profit margin, and cash flow?
Suppose the change had halved, rather than doubled, the firm’s depreciation expense. Now, what would be the impact on net income, total profit margin, and cash flow?
Explain the reason for the similarities or differences in your answers to parts b,c, and d.
Chapter 2 Solutions
FUND OF CORPORATE FINANCE LL W/ACCESS
Ch. 2.1 - Prob. 2.1ACQCh. 2.1 - What is liquidity? Why is it important?Ch. 2.1 - What do we mean by financial leverage?Ch. 2.1 - Explain the difference between accounting value...Ch. 2.2 - What is the income statement equation?Ch. 2.2 - Prob. 2.2BCQCh. 2.2 - Why is accounting income not the same as cash...Ch. 2.3 - What is the difference between a marginal and an...Ch. 2.3 - Do the wealthiest corporations receive a tax break...Ch. 2.4 - Prob. 2.4ACQ
Ch. 2.4 - Prob. 2.4BCQCh. 2.4 - Why is interest paid not a component of operating...Ch. 2 - What types of accounts are the most liquid?Ch. 2 - What is an example of a noncash expense?Ch. 2 - The marginal tax rate is the tax rate which...Ch. 2 - Prob. 2.4CTFCh. 2 - Prob. 1CRCTCh. 2 - Accounting and Cash flows [LO2] Why might the...Ch. 2 - Prob. 3CRCTCh. 2 - Operating Cash Flow [LO2] In comparing accounting...Ch. 2 - Prob. 5CRCTCh. 2 - Cash Flow from Assets [LO4] Suppose a companys...Ch. 2 - Prob. 7CRCTCh. 2 - Net Working Capital and Capital Spending [LO4]...Ch. 2 - Prob. 9CRCTCh. 2 - Prob. 10CRCTCh. 2 - Prob. 11CRCTCh. 2 - Earnings Management [LO2] Companies often try to...Ch. 2 - Building a Balance Sheet [LO1] KCCO, Inc., has...Ch. 2 - Building an Income Statement [LO1] Billys...Ch. 2 - Dividends and Retained Earnings [LO1] Suppose the...Ch. 2 - Prob. 4QPCh. 2 - Calculating Taxes [LO3] The Dyrdek Co. had 267,000...Ch. 2 - Prob. 6QPCh. 2 - Calculating OCF [LO4] Ridiculousness, Inc., has...Ch. 2 - Calculating Net Capital Spending [LO4] Bowyer...Ch. 2 - Calculating Additions to NWC [LO4] The 2014...Ch. 2 - Cash Flow to Creditors [LO4] The 2014 balance...Ch. 2 - Cash Flow to Stockholders [LO4] The 2014 balance...Ch. 2 - Prob. 12QPCh. 2 - Market Values and Book Values [LO1] Klingon...Ch. 2 - Prob. 14QPCh. 2 - Using Income Statements [LO1] Given the following...Ch. 2 - Preparing a Balance Sheet [LO1] Prepare a 2015...Ch. 2 - Prob. 17QPCh. 2 - Prob. 18QPCh. 2 - Net Income and OCF [LO2] During 2014, Raines...Ch. 2 - Prob. 20QPCh. 2 - Prob. 21QPCh. 2 - Calculating Cash Flows [LO4] Consider the...Ch. 2 - Net Fixed Assets and Depreciation [LO4] On the...Ch. 2 - Prob. 24QPCh. 2 - Use the following information for Taco Swell,...Ch. 2 - Use the following information for Taco Swell,...Ch. 2 - Prob. 1MCh. 2 - Prob. 2M
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