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STATEMENT OF CASH FLOWS You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company headquarters (where all of the firm’s records are kept) has been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statement for the year just ended. The firm had $100,000 in the bank at the end of the prior year, and its working capital accounts except cash remained constant during the year. It earned $5 million in net income during the year but paid $800,000 in dividends to common shareholders. Throughout the year, the firm purchased 55.5 million of machinery that was needed for a new project. You have just spoken to the firm’s accountants and learned that annual depreciation expense for the year is $450,000; however, the purchase price for the machinery represents additions to property, plant, and equipment before depredation. Finally, you have determined that the only financing done by the firm was to issue long-term debt of $1 million at a 6% interest rate. What was the firm’s end-of-year cash balance? Recreate the firm’s cash flow statement to arrive at your answer.

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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

Solutions

Chapter
Section
Chapter 3, Problem 13P
Textbook Problem

STATEMENT OF CASH FLOWS You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company headquarters (where all of the firm’s records are kept) has been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statement for the year just ended. The firm had $100,000 in the bank at the end of the prior year, and its working capital accounts except cash remained constant during the year. It earned $5 million in net income during the year but paid $800,000 in dividends to common shareholders. Throughout the year, the firm purchased 55.5 million of machinery that was needed for a new project. You have just spoken to the firm’s accountants and learned that annual depreciation expense for the year is $450,000; however, the purchase price for the machinery represents additions to property, plant, and equipment before depredation. Finally, you have determined that the only financing done by the firm was to issue long-term debt of $1 million at a 6% interest rate. What was the firm’s end-of-year cash balance? Recreate the firm’s cash flow statement to arrive at your answer.

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Chapter 3 Solutions

Fundamentals of Financial Management (MindTap Course List)
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