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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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Chapter 2Question 11
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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Chapter 2Question 12
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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Chapter 2Question 13
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$
Addition to retained earnings 29,445$
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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Chapter 2Questions 15
Input area:
Sales 41,000$Costs 19,500$
Addition to retained earnings 5,100$Dividends paid 1,500$Interest expense 4,500$Tax rate 35%
Output area:
Income Statement
Sales 41,000$Costs 19,500
Depreciation expense 6,846$
EBIT 14,654$Interest expense 4,500EBT 10,154$Taxes 3,554Net income 6,600$
Dividends 1,500$
Addition to retained earnings 5,100$
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Chapter 2Question 16
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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Chapter 2Question 17
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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Chapter 2Questions 18
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 $10,000 are the samebecause each firm has a marginal tax rate of 34%,despite their different average tax rates.
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Chapter 2Questions 19
Input area:
Sales 730,000$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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Chapter 2Question 20
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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Chapter 2Questions 21
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
Sales 22,800$Costs 16,050
Depreciation expense 4,050EBIT 2,700$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,
$1,426 was left to just meet the firm's cash flow needs
for investment.
in new NWC and
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Chapter 2Questions 22
Input area:
Sales 8,280$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
Chapter 2Questions 23
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beg
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Chapter 2Questions 24
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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Chapter 2Questions 25
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$Addition to retained earnings 945.24
2008 Income Statement
2009 Income Statement
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Chapter 2Questions 26
Input area:
2008 2009Sales 7,233$ 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$
2009 Income Statement
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Cash flow to creditors (2,156.00)$
Net new equity 157.76$
Cash flow to stockholders 853.24$