fcf 9th edition chapter 02

5/26/2018 FCF 9th Edition Chapter 02

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Chapter 2Problems 1-26

Input boxes in tan

Output boxes in yellow

Given data in blue

Calculations in red

Answers in green

NOTE: Some functions used in these spreadsheets may require tha

the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.

To install these, click on the Office button

then "Excel Options," "Add-Ins" and select

"Go." Check "Analyis ToolPak" and

"Solver Add-In," then click "OK."


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Chapter 2Question 1

Input area:

Current assets 5,100$Net fixed assets 23,800

Current liabilities 4,300$Long-term debt 7,400

Output area:

Balance sheet

Current assets 5,100$ Current liabilities 4,300$Net fixed assets 23,800 Long-term debt 7,400

Owner's equity 17,200

Total liabilities Total assets 28,900$ +total equity 28,900$

Owner's equity 17,200$

Net working capital 800$


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Chapter 2Questions 2-4

Input area:

Sales 586,000$Costs 247,000Depreciation expense 43,000Interest expense 32,000

Tax rate 35%

Cash dividends 73,000$

Shares outstanding 85,000

Output area:

Income Statement

Sales 586,000$Costs 247,000

Depreciation expense 43,000EBIT 296,000$Interest expense 32,000EBT 264,000$Taxes (35%) 92,400Net income 171,600$

Addition to retained earnings 98,600$

Earnings per share 2.02$

Dividends per share 0.86$


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Chapter 2Question 5

Input area:

Book value of net fixed assets 3,700,000$Book value of current liabilities 1,100,000

Net working capital 380,000$

Market value of net fixed assets 4,900,000$Market value of current assets 1,600,000

Output area:

Net working capital 380,000$Current liabilities 1,100,000Book value of current assets 1,480,000$Book value of net fixed assets 3,700,000Book value of total assets 5,180,000$

Market value of current assets 1,600,000$Market value of net fixed assets 4,900,000Market value of total assets 6,500,000$


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Chapter 2Questions 6,7

Input area:

Taxable income 236,000$

Taxable income0 - 50,000 15%50,001 - 75,000 25%75,001 - 100,000 34%100,001 - 335,000 39%335,001 - 10,000,000 34%10,000,001 - 15,000,000 35%

15,000,001 - 18,333,333 38%18,333,334 + 35%

Output area:

Taxes:15% 50,000$25% 25,00034% 25,000

39% 136,00034% 035% 0

38% 035% 0

75,290$

Average tax rate: 75,290$ = 31.90%

236,000

The marginal tax rate is 39%


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Chapter 2Question 8

Input area:

Sales 27,500$Costs 13,280Depreciation Expense 2,300Interest Expense 1,105

Tax rate 35%

Output area:

Income Statement

Sales 27,500$Costs 13,280

Depreciation expense 2,300EBIT 11,920$Interest expense 1,105EBT 10,815$Taxes (35%) 3,785Net income 7,030$

Operating cash flow 10,435$


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Chapter 2Question 9

Input area:

Dec. 31, 2008 net fixed assets 3,400,000$Dec. 31, 2009 net fixed assets 4,200,000

Depreciation expense 385,000$

Output area:

Net capital spending 1,185,000$


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Chapter 2Question 10

Input area:

Dec. 31, 2008 Current assets 2,100$Dec. 31, 2008 Current liabilities 1,380

Dec. 31, 2009 current assets 2,250$Dec. 31, 2009 current liabilities 1,710

Output area:

Ending NWC 540$Beginning NWC 720$

Additions to net working capital (180)$


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Input area:

Dec. 31, 2008 Long-term debt 2,600,000$

Dec. 31, 2009 Long-term debt 2,900,000$

Interest expense 170,000$

Output area:

Cash flow to creditors (130,000)$


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Input area:

Dec. 31, 2008 Common stock 740,000$Dec. 31, 2008 Additional paid-in surplus 5,200,000

Dec. 31, 2009 Common stock 815,000$Dec. 31, 2009 Additional paid-in surplus 5,500,000

Cash dividends 490,000$

Output area:

Cash flow to stockholders 115,000$


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Input area:

From problems 11,12:2009 Cash flow to creditors (130,000)$2009 Cash flow to stockholders 115,000

New information:2009 Net capital spending 940,000$Change in net working capital (85,000)

Output area:

Cash flow from assets (15,000)$

Operating cash flow 840,000$


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Chapter 2Questions 14

Input area:

Sales 196,000$Costs 104,000Other expenses 6,800Depreciation expense 9,100Interest expense 14,800Taxes 21,455Dividends 10,400

2009 New equity 5,700$Net new long-term debt (7,300)Change in fixed assets 27,000

Output area:

Income Statement

Sales 196,000$Costs 104,000

Other expenses 6,800Depreciation expense 9,100EBIT 76,100$Interest expense 14,800EBT 61,300$

Taxes 21,455Net income 39,845$

Dividends 10,400$


a. Operating cash flow 63,745$

b. Cash flow to creditors 22,100$

c. Cash flow to stockholders 4,700$

d. Cash flow from assets 26,800$

Net capital spending 36,100$

Change in NWC 845$


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Input area:

Sales 41,000$Costs 19,500$

Addition to retained earnings 5,100$Dividends paid 1,500$Interest expense 4,500$Tax rate 35%

Output area:

Income Statement


Depreciation expense 6,846$

EBIT 14,654$Interest expense 4,500EBT 10,154$Taxes 3,554Net income 6,600$

Dividends 1,500$



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Input area:

Cash 195,000$Intangible net fixed assets 780,000

Accounts payable 405,000Accounts receivable 137,000Tangible net fixed assets 2,800,000Inventory 264,000Notes payable 160,000

Accumulated retained earnings 1,934,000Long-term debt 1,195,300

Output area:

Cash 195,000$Accounts receivable 137,000Inventory 264,000Current assets 596,000$

Tangible net fixed assets 2,800,000$Intangible net fixed assets 780,000

Total assets 4,176,000$

Balance sheet as


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Accounts payable 405,000$Notes payable 160,000Current liabilities 565,000$Long-term debt 1,195,300Total liabilities 1,760,300$

Common stock 481,700$

Accumulated retained earnings 1,934,000

Total liability & owners' equity 4,176,000$

f Dec. 31, 2009


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Input area:

Total liabilities 7,300$

a. Total assets 8,400$b. Total assets 6,700

Output area:

a. Owners' equity 1,100$

b. Owners' equity 0


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Input area:

Corporation growth taxable income 88,000$Corporation income taxable income 8,800,000

Taxable income0 - 50,000 15%50,001 - 75,000 25%75,001 - 100,000 34%100,001 - 335,000 39%335,001 - 10,000,000 34%

10,000,001 - 15,000,000 35%15,000,001 - 18,333,333 38%18,333,334 + 35%

Output area:

Corporation Growth:Taxes:15% 50,000$

25% 25,00034% 13,00039% 0

34% 035% 0

38% 035% 0

18,170$

With a marginal tax rate of 34%, the tax on an

additional $10,000 would be $3,400.

Corporation Income:Taxes:15% 50,000$


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25% 25,00034% 25,00039% 235,000

34% 8,465,00035% 0

38% 035% 0

2,992,000$

With a marginal tax rate of 34%, the tax on anadditional $10,000 would be $3,400.

The tax bills on an additional $10,000 are the samebecause each firm has a marginal tax rate of 34%,despite their different average tax rates.


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Input area:

Sales 730,000$Costs 580,000

Administrative and selling expenses 105,000Depreciation expense 135,000Interest expense 75,000

Tax rate 35%

Output area:

Income Statement

Sales 730,000$Costs 580,000

Administrative and selling expenses 105,000

Depreciation expense 135,000EBIT (90,000)$Interest expense 75,000EBT (165,000)$Taxes 0

a. Net income (165,000)$

b. Operating cash flow 45,000$

c. Net income was negative because of the tax deductibility and

interest expense. However, the actual cash flow from operations

was positive because depreciation is a non-cash expense andinterest is a financing, not an operating, expense.


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Input area:

From Problem 19:

Operating Cash Flow 45,000$Interest 75,000

New information:

Cash dividend 25,000$New investment in net fixed income 0New investment in net working capital 0New stock issued during year 0

Net capital spending 0Net new equity 0

Output area:

Cash flow from assets 45,000$Cash to from stockholders 25,000$Cash flow to creditors 20,000$

Net new long-term debt 55,000$

A firm can still pay out dividends if net income is

negative; it just has to be sure there is sufficient

cash flow to make dividend payments.


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Input area:

Sales 22,800$Cost of goods sold 16,050Depreciation expense 4,050Interest expense 1,830Dividends paid 1,300New debt issued 0

2008 Net fixed assets 13,650$2008 Current assets 4,8002008 Current liabilities 2,700

2009 Net fixed assets 16,800$

2009 Current assets 5,9302009 Current liabilities 3,150

Tax rate 34%

Output area:

Income Statement


Depreciation expense 4,050EBIT 2,700$Interest expense 1,830EBT 870$Taxes (34%) 296

a. Net income 574$

b. Operating cash flow 6,454$

c. Ending NWC 2,780$Beginning NWC 2,100$Change in net working capital 680$

Net capital spending 7,200$

Cash flow from assets (1,426)$

The cash flow from assets can be positive or negative, since it represents whether

the firm raised funds or distributed funds on a net basis. In this problem, even though


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net income and OCF are positive, the firm invested heavily in both fixed assets and net

working capital; it had to raise a net $1,426 in funds from its stockholders and

creditors to make these investments.

d. Cash flow to creditors 1,830$

Cash flow to stockholders (3,256)$

New equity 4,556$

The firm has positive earnings in the accounting sense (NI>0) and had positive cash flowfrom operations. The firm invested $680 $7,200in new fixed assets. The firm had to raise $1,426 from itsstakeholders to support this new investment. It accomplished this by raising $4,556in the form of equity. After paying out $1,300 of this in the form of dividends toshareholders and $1,830 in the form of interest to creditors,

$1,426 was left to just meet the firm's cash flow needs

for investment.

in new NWC and


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Input area:

Sales 8,280$Cost of goods sold 3,861$Depreciation expense 738$Interest expense 211$

2008 Current assets 653$2008 Net fixed assets 2,691$2008 Current liabilities 261$2008 Long-term debt 1,422$

2009 Current assets 707$2009 Net fixed assets 3,240$

2009 Current liabilities 293$2009 Long-term debt 1,512$

2009 New fixed assets purchased 1,350$2009 New long-term debt 270$Tax rate 35%

Output area:

Income Statement

Sales 8,280.00$Costs 3,861.00Depreciation expense 738.00EBIT 3,681.00$Interest expense 211.00EBT 3,470.00$Taxes (35%) 1,214.50Net income 2,255.50$

a. 2008 Total assets 3,344.00$2008 Total liabilities 1,683.00$2008 Owners' equity 1,661.00$

2009 Total assets 3,947.00$2009 Total liabilities 1,805.00$2009 Owners' equity 2,142.00$

b. 2008 Net working capital 392.00$


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2009 Net working capital 414.00$Change in net working capital 22.00$


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c. Net capital spending 1,287.00$Fixed assets sold 63.00$

2009 Operating cash flow 3,204.50$Cash flow from assets 1,895.50$

d. Debt retired 180.00$

Net new borrowing 90.00$Cash flow to creditors 121.00$


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Net capital spending = NFAend- NFAbeg+ Depreciation

= (NFAend- NFAbeg) + (Depreciation + ADbeg) - A

= (NFAend- NFAbeg) + ADend- ADbeg

= (NFAend+ ADend) - (NFAbeg+ ADbeg)

= FAend- FAbeg



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beg


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Input area:

1st Taxable income 335,001$2nd Taxable income 18,333,334

Taxable income0 - 50,000 15%50,001 - 75,000 25%75,001 - 100,000 34%100,001 - 335,000 39%335,001 - 10,000,000 34%

10,000,001 - 15,000,000 35%15,000,001 - 18,333,333 38%18,333,334 + 35%

Output area:

a) The tax bubble causes average tax rates to catch upto marginal rates, thus eliminating the tax advantageof low marginal rates for high income corporations.

b) Taxes:15% 50,000$ 50,000$25% 25,000 25,00034% 25,000 25,00039% 235,000 235,000

34% 1 * 9,665,000

35% 0 5,000,000

38% 0 3,333,33335% 0 1 *

113,900$ 6,416,667$

Average tax rate = 113,900$ 6,416,667$335,001 18,333,334

= 34% 35%

*denotes marginal tax rate


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c) Income 200,000$

15% 50,000$25% 25,00034% 25,000

45.75% 100,000

34% 035% 038% 035% 0

68,000$

Taxes = 200,000$34%

68,000$


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Input area:

2008 2009Sales 7,233$ 8,085$Depreciation 1,038 1,085Cost of goods sold 2,487 2,942Other expenses 591 515Interest 485 579Cash 3,792 4,041Accounts receivable 5,021 5,892Short-term notes payable 732 717Long-term debt 12,700 15,435Net fixed assets 31,805 33,921Accounts payable 3,984 4,025Inventory 8,927 9,555

Dividends 882 1,011

Tax rate 34% 34%

Output area:

Cash 3,792$ Accounts payable 3,984$

Accounts receivable 5,021 Notes payable 732Inventory 8,927 Current liabilities 4,716$

Current assets 17,740$Long-term debt 12,700$

Net fixed assets 31,805$ Owners' equity 32,129Total assets 49,545$ Total liab. & equity 49,545$

Cash 4,041$ Accounts payable 4,025$Accounts receivable 5,892 Notes payable 717Inventory 9,555 Current liabilities 4,742$Current assets 19,488$

Long-term debt 15,435$Net fixed assets 33,921$ Owners' equity 33,232Total assets 53,409$ Total liab. & equity 53,409$

Balance sheet as of Dec. 31, 2009

Balance sheet as of Dec. 31, 2008


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Sales 7,233.00$Costs 2,487.00Other expenses 591.00Depreciation 1,038.00

EBIT 3,117.00$Interest 485.00EBT 2,632.00$Taxes 894.88Net income 1,737.12$

Dividends 882.00$Addition to retained earnings 855.12

Sales 8,085.00$Costs 2,942.00Other expenses 515.00Depreciation 1,085.00EBIT 3,543.00$Interest 579.00EBT 2,964.00$Taxes 1,007.76Net income 1,956.24$

Dividends 1,011.00$Addition to retained earnings 945.24

2008 Income Statement



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Input area:

2008 2009Sales 7,233$ 8,085$Depreciation 1,038 1,085Cost of goods sold 2,487 2,942Other expenses 591 515Interest 485 579Cash 3,792 4,041Accounts receivable 5,021 5,892Short-term notes payable 732 717Long-term debt 12,700 15,435Net fixed assets 31,805 33,921Accounts payable 3,984 4,025Inventory 8,927 9,555

Dividends 882 1,011

Tax rate 34% 34%

From Problem 25:

Owners' equity 32,129$ 33,232$

Output area:

Sales 8,085.00$Costs 2,942.00

Other expenses 515.00Depreciation 1,085.00

EBIT 3,543.00$Interest 579.00EBT 2,964.00$Taxes 1,007.76Net income 1,956.24$

Dividends 1,011.00$Addition to retained earnings 945.24

Operating cash flow 3,620.24$Change in NWC 1,722.00Net capital spending 3,201.00

Cash flow from assets (1,302.76)$

Net new long-term debt 2,735.00$



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Cash flow to creditors (2,156.00)$

Net new equity 157.76$

Cash flow to stockholders 853.24$

fcf 9th edition chapter 02

Documents

edition chapter

book value of net fixed

book value of current

market value of current

39r62018 fcf

book value of total

market value of total

net income