Question

22. The following is income statement and balance sheet information for a firm. (in Smillions) Sales COGS Interest Dividends Depreciation Current Assets Current Liabilities Long Term Debt Net Fixed Assets Owners' Equity Taxes ($ amount) 2011 $285 175 20 10 40 225 95 320 640 440 17.5 2012 $320 200 35 10 45 210 85 340 700 495 17.5 Note: when answering this problem, do not waste time constructing income statements and balance sheets. Use the above information directly. (a) Calculate Net Capital Spending for 2012 (b) Suppose Cash Flow to Stockholders for 2012 = -12.5. In one, very short sentence) interpret this result. Calculate Cash Flow to Bondholders for 2012. (c) Using the result from part (b) (i.e., do not use the original data), calculate Cash Flow from Assets (i.e., free cash flow. Interpret in one, very short sentence,

          22. The following is income statement and balance sheet information for a firm.
(in Smillions)
Sales
COGS
Interest
Dividends
Depreciation
Current Assets
Current Liabilities
Long Term Debt
Net Fixed Assets
Owners' Equity
Taxes ($ amount)
2011
$285
175
20
10
40
225
95
320
640
440
17.5
2012
$320
200
35
10
45
210
85
340
700
495
17.5
Note: when answering this problem, do not waste time constructing income statements and
balance sheets. Use the above information directly.
(a) Calculate Net Capital Spending for 2012
(b) Suppose Cash Flow to Stockholders for 2012 = -12.5. In one, very short sentence)
interpret this result.
Calculate Cash Flow to Bondholders for 2012.
(c) Using the result from part (b) (i.e., do not use the original data), calculate Cash
Flow from Assets (i.e., free cash flow. Interpret in one, very short sentence,

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Added by Rebekah K.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Supreeta N

08/01/2023

Step 1

So, Net Capital Spending = (Net Fixed Assets in 2012 - Net Fixed Assets in 2011) + Depreciation in 2012 = (700 - 640) + 45 = $105 million. Show more…

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22. The following is income statement and balance sheet information for a firm. (in Smillions) Sales COGS Interest Dividends Depreciation Current Assets Current Liabilities Long Term Debt Net Fixed Assets Owners' Equity Taxes ($ amount) 2011 $285 175 20 10 40 225 95 320 640 440 17.5 2012 $320 200 35 10 45 210 85 340 700 495 17.5 Note: when answering this problem, do not waste time constructing income statements and balance sheets. Use the above information directly. (a) Calculate Net Capital Spending for 2012 (b) Suppose Cash Flow to Stockholders for 2012 = -12.5. In one, very short sentence) interpret this result. Calculate Cash Flow to Bondholders for 2012. (c) Using the result from part (b) (i.e., do not use the original data), calculate Cash Flow from Assets (i.e., free cash flow. Interpret in one, very short sentence,

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Transcript

00:01 Hello students, here is a question.

00:02 The following income statement and balance sheet information of a firm i .e.

00:06 Sales of cost of goods sold, interest dividend, depreciation of current assets and current liability, long -term debts net fixed asset of owners, equity taxes are given in the question.

00:15 So, here is an instruction that when answering this problem do not waste time in constructing an income statement and balance sheet, use the above information directly.

00:24 So, this was the instruction and we have three sub questions to solve here.

00:28 So, first is calculate net spendings for 2012 and b is suppose cash flow to the stockholders for 2012 is 12 .5 in one very short sentence interrupt the result.

00:43 So, calculate cash flow on bondholders for 2012 and third is using the result for firm part.

00:49 So, let us start solving this.

00:57 The first is calculate net capital spending.

01:00 So, net capital spending are for 2012 it is net fixed asset, net fixed assets of 2012 plus depreciation for 2012 minus net fixed asset for 2011.

01:26 So, the values are 700 dollars plus 45 minus 640.

01:37 So, which comes to 105, 105 dollars and our second question is using a result from the part we have to calculate.

01:50 So, net new long term debts are, debts are long term debts minus long term debts of 2011 minus, sorry 12 minus long term debts of 2011.

02:25 So, that will be 340 minus 320 which gives us 20 dollars...

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