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Problem 1
Predator Pucks, Inc. has current assets of $4,000, net fixed assets of $22,500, current
liabilities of $3,400, and long-term debt of $6,800. What is the value of the shareholders
equity account for this firm? How much is net working capital?
ASSETS
Current assets
Net fixed assets
4,000
22,500
Current liabilities
3,400
6,800
Owners' equity
Total assets
26,500
26,500
Problem 2
Mama Roach Exterminators Inc. has sales of $634,000, COGS $305,000, depreciation
expense of $46,000, interest expense of $29,000 and tax rate of 35%. What is the net income
for this firm?
Sales
634,000
305,000
Depreciation
= EBIT
283,000
Interest
29,000
= Taxable income
Tax
= Net income
46,000
254,000
88,900
165,100
Problem 3
Parrothead Enterprises Balance Sheets 2010 & 2011
Assets
Current assets
Net fixed assets
2011
725
785
2990
3600
Current liabilities
Long term debt
Owners' equity
Total assets
9,200
4,290
Depreciation
820
= Operating Income/EBIT
4,090
Interest
234
= Pre-tax/Taxable income
Tax
3,856
3,856 x 35% = 1,349.6
= Net income
2010
2011
290
325
1580
1680
c. The firm purchased $1,500 new fixed assets during the year. What is the amount of find
fixed assets sold during the year? Calculate CF from assets.
Net capital spending (or Investment in FA) = FA bought FA sold
Investment in FA = Net FA 2011 Net FA 2010 + Depreciation
= $3,600 2,990 + 820 = $1,430
Fixed assets sold = $1,500 1,430 = $70
Cash flow from assets
(1) EBIT
4,090
+ depreciation
820
Current taxes
1,349.6
= Operating CF
3,560.4
1,430
25
2,105.4
d. The firm raised $300 new long-term debt during the year. What is the amount of debt
paidoff during the year? Calculate CF to creditors (bondholders).
Net borrowing = Debt issued Debt paidoff
Net borrowing = LT debt 2011 LT debt 2010
= 1,680 1,580 = 100
Debt paidoff = 300 100 = 200
Cash flow to creditors
Interest paid
234
100
134
Problem 4
Calculate CF from Assets, CF to Bondholders, and CF to Stockholders for WildHack.
WildHack
Sales
COGS
Depreciation
EBIT
Interest
Taxable income
Taxes
Net income
3,756
2,453
490
813
613
200
68
132
Dividends
Addition to retained earnings
WildHack
($ million)
46
86
2011
120
224
424
768
88
192
368
648
5,228
5,354
5,996
========
6,002
========
124
1,412
1,536
144
1,039
1,183
1,804
2,077
Owners' equity
Common stock and paid in surplus
Retained earnings
Total
300
2,356
2,656
300
2,442
2,742
5,996
========
6,002
========
Assets
Current assets
Cash
A/R
Inventory
Total
Fixed assets
Net plant and equipment
Total assets
CF from assets
(1) Operating CF
EBIT
Interest paid
613
+ depreciation
490
273
current taxes
68
= CF to creditors
340
= Operating CF
1235
Ending Net FA
5354
Beginning Net FA
5228
+ Depreciation
490
= CF to stockholders
46
= Investment in FA
(or Net Capital Spending)
Dividends
46
616
-535
-768
= Change in NWC
233
CF from assets
= (1) (2) (3)
386
386
(*)