In: Finance
STATEMENT OF CASH FLOWS
You have just been hired as a financial analyst for Barrington
Industries. Unfortunately, company headquarters (where all of the
firm's records are kept) has been destroyed by fire. So, your first
job will be to recreate the firm's cash flow statement for the year
just ended. The firm had $100,000 in the bank at the end of the
prior year, and its working capital accounts except cash remained
constant during the year. It earned $5 million in net income during
the year but paid $750,000 in dividends to common shareholders.
Throughout the year, the firm purchased $5.4 million of machinery
that was needed for a new project. You have just spoken to the
firm's accountants and learned that annual depreciation expense for
the year is $440,000; however, the purchase price for the machinery
represents additions to property, plant, and equipment before
depreciation. Finally, you have determined that the only financing
done by the firm was to issue long-term debt of $1 million at a 6%
interest rate. What was the firm's end-of-year cash balance?
Recreate the firm's cash flow statement to arrive at your answer.
Write out your answer completely. For example, 5 million should be
entered as 5,000,000. Round your answer to the nearest dollar, if
necessary.
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