FIN 3610 HOMEWORK 1 With Questions And Answers.Q1. Which one of the following will increase the value of a firm's net working capital?
A. using cash
... [Show More] to pay a supplier
B. depreciating an asset
C. collecting an accounts receivable
D. purchasing inventory on credit
E. selling inventory at a profit
Q2. Four years ago, Velvet Purses purchased a mailing machine at a cost of $176,000. This equipment is currently valued at $64,500 on today's balance sheet but could actually be sold for $58,900. This is the only fixed asset the firm owns. Net working capital is $57,200 and long-term debt is $111,300. What is the book value of shareholders' equity?
A. $4,800
B. $7,700
C. $10,400
D. $222,600
E. $233,000
Book value of shareholders' equity = $64,500 + $57,200 - $111,300 = $10,400
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Q3.
Galaxy Interiors 2011 Income Statement ($ in
millions)
Net Sales
Cost of goods sold
Depreciation
Earnings before interest and taxes
Interest paid
Taxable Income
Less: Taxes
Net Income
$21,415
16,408
1,611
3,396
1,282
$2,114
740
$1,374
Galaxy Interiors 2010 and 2011 Balance Sheets ($ in millions)
Cash
Accounts
receivable
2010
$668
1,611
2011
$297 Accounts payable
1,527 Accrued expenses
2010
$1,694
2,500
2011
$1,532
0
Inventory
Total
Net fixed assets
Total Assets
3,848 2,947 Total
$6,127 $4,771 Long-term debt
17,489 17,107 Common stock
Retained earnings
Total liabilities &
$23,616 $21,878
equity
$4,194 $1,532
9,800 10,650
7,500 7,000
2,122 2,696
$23,616 $21,878
Given the information from income statement and balance sheet of Galaxy Interiors, what is the cash flow from assets for 2011?
A.$1,732
B.$2,247
C.$2,961
D.$3,915
E.$4,267
Change in net working capital = ($4,771 - $1,532) - ($6,127 - $4,194) = $1,306 Net capital spending = $17,107 - $17,489 + $1,611 = $1,229
Operating cash flow = $3,396 + $1,611 - $740 = $4,267 Cash flow from assets = $4,267 - $1,229 - $1,306 = $1,732
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Q4.
Given the information from income statement and balance sheet of Galaxy Interiors, what is the cash flow to stockholders for 2011?
Hint:
Cash flow to stockholders = Dividends paid - Net new equity issued
Net new equity issued = change in common stock and paid-in surplus
In this example, paid-in surplus is assumed to be zero for both years. [Show Less]