You are given the following information: 2018 Sales $12,000 Cost of goods sold $
ID: 2818473 • Letter: Y
Question
You are given the following information: 2018
Sales
$12,000
Cost of goods sold
$5,400
Depreciation expense
$1,000
Interest
$300
Tax rate
35%
2017
2018
Current assets
$900
$1,000
Net fixed assets
$3,800
$4,500
Current liabilities
$300
$400
Long-term debt
$2,000
$2,100
a. Calculate the cash flow from assets for 2018. (Hint: Taxes = Earnings before taxes x Tax rate) show your work
b. Calculate the cash flow to shareholders for 2018. show your work
You are given the following information: 2018
Sales
$12,000
Cost of goods sold
$5,400
Depreciation expense
$1,000
Interest
$300
Tax rate
35%
Explanation / Answer
Taxes = EBT * Tax Rate = (Sales- COGS - Depreciation - Interest )*Tax rate = (12,000 - 5400 - 1000 - 300) * 35% = 1855
Operating cash flow =EBIT - Taxes + Depreciation = (Sales - COGS - Depreciation Expenses ) - Taxes + Depreciation = (12000 - 5400 -1000) - 1855 + 5400 = 9145
Free Cash flow to assets(FCFA) = cash flow from operating + Decrease in assets + NWC = 9145 + (4500-3800) + (1000-900) = 9145 + 700 + 100 = 9945
Free cash flow to equity holder = FCFA -interest *(1-tax rate) - (Net borrowing) = 9945 - 300*0.65 -100 = 9650
Best of Luck. God Bless
Please Rate Well
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.