Question

The Davidson Corporation’s balance sheet and income statement are provided here. $$ \begin{matrix} \text{Assets} & \text{Liabilities and Equity}\\ \text{Cash and equivalents} & \text{\$ 15} & \text{Accounts payable} & \text{\$ 120}\\ \text{Accounts receivable} & \text{515} & \text{Accruals} & \text{280}\\ \text{Inventories} & \text{880} & \text{Notes payable} & \text{220}\\ \text{Total current assets} & \text{\$ 1.410} & \text{Total current liabilities} & \text{\$ 620}\\ \text{Net plant and equipment} & \text{2.590} & \text{Long-term bonds} & \text{1.520}\\ \text{ } & \text{ } & \text{Total liabilities} & \text{\$ 2.140}\\ \text{ } & \text{ } & \text{Common stock (100 million shares)} & \text{260}\\ \text{ } & \text{ } & \text{Retained earnings} & \text{1.600}\\ \text{ } & \text{ } & \text{Common equity} & \text{\$ 1.860}\\ \text{Total assets} & \text{\$ 4.000} & \text{Total liabilities and equity} & \text{\$ 4.000}\\ \end{matrix} $$ $$ \begin{matrix} \text{Sales} & \text{\$ 6.250}\\ \text{Operating costs excluding depreciation & amortization} & \text{5.230}\\ \text{EBITDA} & \text{\$ 1.020}\\ \text{Depreciation and amortiaztion} & \text{220}\\ \text{EBIT} & \text{\$ 800}\\ \text{Interest} & \text{180}\\ \text{EBT} & \text{\$ 620}\\ \text{Taxes (40\\%)} & \text{248}\\ \text{Net income} & \text{\$ 372}\\ \text{Common dividends paid} & \text{\$ 146}\\ \text{Earning per share} & \text{\$ 3.72}\\ \end{matrix} $$ a. Construct the statement of stockholders’ equity for December 31, 2016. No common stock was issued during 2016. b. How much money has been reinvested in the firm over the years? c. At the present time, how large a check could be written without it bouncing? d. How much money must be paid to current creditors within the next year?

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Arlington Corporation’s financial statements (dollars and shares are in millions) are provided here. $$ \begin{matrix} \text{Balance Sheets as of December 31}\\ \text{ } & \text{2016} & \text{2015}\\ \text{Assets}\\ \text{Cash and equivalents} & \text{\$ 15.000} & \text{\$ 14.000}\\ \text{Accounts receivable} & \text{35.000} & \text{30.000}\\ \text{Inventories} & \text{33.320} & \text{27.000}\\ \text{Total current assets} & \text{\$ 83.320} & \text{\$ 71.000}\\ \text{Net plant and equipment} & \text{48.000} & \text{46.000}\\ \text{Total assets} & \text{\$ 131.320} & \text{\$ 117.000}\\ \text{Liabilities and Equity}\\ \text{Accounts payable} & \text{\$ 10.100} & \text{\$ 9.000}\\ \text{Accruals} & \text{8.000} & \text{6.000}\\ \text{Notes payable} & \text{7.000} & \text{5.050}\\ \text{Total current liabilities} & \text{\$ 25.100} & \text{\$ 20.050}\\ \text{Long-term bonds} & \text{20.000} & \text{20.000}\\ \text{Total liabilities} & \text{\$ 45.100} & \text{\$ 40.050}\\ \text{Common stack (4.000) shares)} & \text{40.000} & \text{40.000}\\ \text{Retained earnings} & \text{46.220} & \text{36.950}\\ \text{Common equity} & \text{\$ 86.220} & \text{\$ 76.950}\\ \text{Total liabilities and equity} & \text{\$ 131.320} & \text{\$ 117.000}\\ \end{matrix} $$ $$ \begin{matrix} \text{Income Statement for Year Ending December 31, 2016}\\ \text{Sales} & \text{\$ 210.000}\\ \text{Operating costs excluding depreciation and amortization} & \text{160.000}\\ \text{EBITDA} & \text{\$ 50.000}\\ \text{Depreciation & amortization} & \text{6.000}\\ \text{EBIT} & \text{\$44.000}\\ \text{Interest} & \text{5.350}\\ \text{EBT} & \text{\$ 38.650}\\ \text{Taxes (40\\%)} & \text{15.460}\\ \text{Net income} & \text{\$ 23.190}\\ \text{Dividends paid} & \text{\$ 13.920}\\ \end{matrix} $$ a. What was net operating working capital for 2015 and 2016? b. What was Arlington’s 2016 free cash flow? c. Construct Arlington’s 2016 statement of stockholders’ equity. d. What was Arlington’s 2016 EVA? Assume that its after-tax cost of capital is 10%. e. What was Arlington’s MVA at year-end 2016? Assume that its stock price at December 31, 2016, was $25.
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Financial information for Powell Panther Corporation is shown here $$ \begin{matrix} \text{Sales} & \text{\$ 1.200.0} & \text{\$ 1.000.0}\\ \text{Operating costs excluding depreciation and amortization} & \text{1.020.0} & \text{850.0}\\ \text{EBITDA} & \text{\$ 180.0} & \text{\$ 150.0}\\ \text{Depreciation & amortization} & \text{30.0} & \text{25.0}\\ \text{Earnings before interest and taxes (EBIT)} & \text{\$ 150.0} & \text{\$ 125.0}\\ \text{Interest} & \text{21.7} & \text{20.2}\\ \text{Earnings before taxes (EBT)} & \text{\$ 128.3} & \text{\$ 104.8}\\ \text{Taxes (40\\%)} & \text{51.3} & \text{41.9}\\ \text{Net income} & \text{\$ 77.0} & \text{\$ 62.9}\\ \end{matrix} $$ $$ \begin{matrix} \text{ } & \text{2016} & \text{2015}\\ \text{Assets} & \text{\$ 12.0} & \text{\$ 10.0}\\ \text{Cash and equivalents} & \text{180.0} & \text{150.0}\\ \text{Accounts receivable} & \text{180.0} & \text{200.0}\\ \text{Inventories} & \text{\$ 372.0} & \text{\$ 360.0}\\ \text{Total current assets} & \text{300.0} & \text{250.0}\\ \text{Net plant and equipment} & \text{\$ 672.0} & \text{\$ 610.0}\\ \text{Total assets} & \text{ } & \text{ }\\ \text{Liabilities and Equity} & \text{ } & \text{ }\\ \text{Accounts payable} & \text{\$ 108.0} & \text{\$ 90.0}\\ \text{Accruals} & \text{72.0} & \text{60.0}\\ \text{Notes payable} & \text{67.0} & \text{51.5}\\ \text{Total current liabilities} & \text{\$ 247.0} & \text{\$ 201.5}\\ \text{Long-term bonds} & \text{150.0} & \text{150.0}\\ \text{Total liabilities} & \text{\$ 397.0} & \text{\$ 351.5}\\ \text{Common stock (50 million shares)} & \text{50} & \text{50.0}\\ \text{Retained earnings} & \text{225.0} & \text{208.5}\\ \text{Common equity} & \text{\$275.0} & \text{\$ 258.5}\\ \text{Total liabilities and equity} & \text{\$ 672.0} & \text{\$ 610.0}\\ \end{matrix} $$ a. What was net operating working capital for 2015 and 2016? b. What was the 2016 free cash flow? c. How would you explain the large increase in 2016 dividends?