Calculating Total Cash Flows Bedrock Gravel Corp. shows the following information on its 2002 income statement: sales = $130,000; costs = $82,000; other expenses = $3,500; depreciation expense = $6,000; interest expense = $14,000; taxes = $8,330; dividends = $6,400. In addition, you're told that the firm issued $2,830 in new equity during 2002, and redeemed $6,000 in outstanding long-term debt.
a. What is the 2002 operating cash flow?
b. What is the 2002 cash flow to creditors?
c. What is the 2002 cash flow to stockholders?
d. If net fixed assets increased by $5,000 during the year, what was the addition to NWC?
Using Income Statements Given the following information for Soprano Pizza Co., calculate the depreciation expense: sales = $21,000; costs = $10,000; addition to retained earnings = $4,000; dividends paid = $800; interest expense = $1,200; tax rate = 35 percent.
Preparing a Balance Sheet Prepare a balance sheet for Tim's Couch Corp. as of December 31, 2002, based on the following information: cash = $300,000; patents and copyrights = $775,000; accounts payable = $700,000; accounts receivable = $150,000; tangible net fixed assets = $3,500,000; inventory =
$425,000; notes payable = $145,000; accumulated retained earnings = $2,150,000; long-term debt = $1,300,000.
17. Residual Claims Clapper's Clippers, Inc., is obligated to pay its creditors $2,900 during the year.
a. What is the market value of the shareholders' equity if assets have a market value of $3,600?
b. What if assets equal $2,300?
18. Marginal versus Average Tax Rates (Refer to Table 2.3.) Corporation Growth has $80,000 in taxable income, and Corporation Income has $9,000,000 in taxable income.
a. What is the tax bill for each firm?
b. Suppose both firms have identified a new project that will increase taxable income by $10,000. How much in additional taxes will each firm pay? Why is this amount the same?
19. Net Income and OCF During 2002, Lambert Limo Corp. had sales of $900,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $600,000, $170,000, and $105,000, respectively. In addition, the company had an interest expense of $85,000 and a tax rate of 35 percent. (Ignore any tax loss carry-back or carry-forward provisions.)
a. What is Lambert's net income for 2002?
b. What is its operating cash flow?
20. Accounting Values versus Cash Flows In Problem 19, suppose Lambert Limo Corp. paid out $25,000 in cash dividends. Is this possible? If no new investments were made in net fixed assets or net working capital, and if no new stock was issued during the year, what do you know about the firm's long-term debt account?
21. Calculating Cash Flows Faulk Industries had the following operating results for 2002: sales = $12,200; cost of goods sold = $9,000; depreciation expense = $1,600; interest expense = $200; dividends paid = $300. At the beginning of the year, net fixed assets were $8,000, current assets were $2,000, and current liabilities were $1,500. At the end of the year, net fixed assets were $8,400, current assets were $3,100, and current liabilities were $1,800. The tax rate for 2002 was 34 percent.
a. What is net income for 2002?
b. What is the operating cash flow for 2002?
c. What is the cash flow from assets for 2002? Is this possible? Explain.
d. If no new debt was issued during the year, what is the cash flow to creditors? What is the cash flow to stockholders? Explain and interpret the positive and negative signs of your answers in (a) through (d).
22. Calculating Cash Flows Consider the following abbreviated financial statements for Parrothead Enterprises:
PARROTHEAD ENTERPRISES Partial Balance Sheets as of December 31, 2001 and 2002
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