Jetson Spacecraft Corp. shows the following information on its 2009 income state

Question

Jetson Spacecraft Corp. shows the following information on its 2009 income statement: sales = $201,000; costs = $97,000; other expenses-$6,400, depreciation expense = $9,000; interest expense = $14,200; taxes $26,040; dividends $10,000. In addition, you're told that the firm issued $7,500 in new equity during 2009 and redeemed $9,100 in outstanding long-term debt. (a) What is the 2009 operating cash flow? (Click to select) (b) What is the 2009 cash flow to creditors? (Click to select) (c) What is the 2009 cash flow to stockholders? (Click to select) (d) If net fixed assets increased by $23,000 during the year, what was the addition to NWC? (Click to select)

Explanation / Answer

a) OCF = EBIT + Depreciation - Taxes = 88,600 + 9,000 - 26,040 = $71,560

b) CFC = Interest – Net new LTD = 14,200 – (0 - 9,100) = $23,300

c) CFS = Dividends – Net new equity = 10,000 – 7,500 = $2,500

d) We know that CFA = CFC + CFS,
so:CFA = 23,300 + 2,500 = $25,800
CFA is also equal to OCF – Net capital spending – Change in NWC.

Net capital spending = Increase in NFA + Depreciation = 23,000 + 9,000 = 32,000

CFA = OCF – Net capital spending – Change in NWC

$25,800 = 71,560 – 32,000 – Change in NWC

Change in NWC = $13,760

Sales $        201,000 Costs $          97,000 Other Expenses $            6,400 Depreciation $            9,000 EBIT $          88,600 Interest Expense $          14,200 Taxable Income $          74,400 Taxes $          26,040 Net Income $          48,360 Dividends $          10,000 Addition to RE $          38,360

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