Fundamentals Of Corporate Finance, 9th Edition
9th Edition
ISBN: 9781260052220
Author: Richard Brealey; Stewart Myers; Alan Marcus
Publisher: McGraw-Hill Education
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Chapter 9, Problem 7QP
Summary Introduction
To compute: The statement of income.
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The owner of a bicycle repair shop forecasts revenues of $176,000 a year. Variable costs will be $54,000, and rental costs for the shop are $34,000 a year. Depreciation on the repair tools will be $14,000. Prepare an income statement for the shop based on these estimates. The tax rate is 40%.
NOTE: I know this is a simple one (Revenue - Expenses = Pretax profit - Taxes = Net Income). It’s just asking for income statement entries. However, for some reason I currently can’t figure out, a supposedly simple calculation is being marked as incorrect. I just need somebody else to take a look at this. Please help. Thanks!
The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Varlable costs will be $50,000, and rental costs for the shop
are $30,000 a year. Depreciation on the repair tools will be $10,000.
a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%.
INCOME STATEMENT
Depreciation
Pretax profit
Rental costs
Revenue
Taxes
b. Calculate the operating cash flow for the repair shop using the three methods given below:
1. Dollars in minus dollars out.
II. Adjusted accounting profits.
III. Add back depreciation tax shield.
Methods of Calculation
i. Dollars in minus dollars out
ii. Adjusted Accounting profits
iii. Add back depreciation tax shield
Operating
Cash flow
The owner of a bicycle repair shop forecasts revenues of $196,000 a year. Variable costs will be $59.000, and rental costs for the shop are $39.000 a year. Depreciation on the repair tools will be $19.000.
a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%
Calculate the operating cash flow for the repair shop using the three methods given below Now calculate the operating cash flow
1. Dollars in minus dollars out
2. Adjusted accounting profits, in
3.Add back depreciation tax shield
Chapter 9 Solutions
Fundamentals Of Corporate Finance, 9th Edition
Ch. 9 - Prob. 1QPCh. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 10QPCh. 9 - Prob. 12QP
Ch. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Prob. 17QPCh. 9 - Prob. 20QPCh. 9 - Prob. 21QPCh. 9 - Prob. 22QPCh. 9 - Prob. 23QPCh. 9 - Prob. 24QPCh. 9 - Prob. 25QPCh. 9 - Prob. 26QPCh. 9 - Prob. 27QPCh. 9 - Prob. 28QPCh. 9 - Prob. 29QPCh. 9 - Prob. 30QPCh. 9 - Prob. 32QPCh. 9 - Prob. 34QP
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