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South Sea Baubles has the following (incomplete) balance sheet and income statement. BALANCE SHEET AT END...

South Sea Baubles has the following (incomplete) balance sheet and income statement.

BALANCE SHEET AT END OF YEAR
(Figures in $ millions)
Assets 2015 2016 Liabilities and Shareholders' Equity 2015 2016
Current assets $ 90 $ 140 Current liabilities $ 50 $ 60
Net fixed assets 800 900 Long-term debt 600 750
INCOME STATEMENT, 2016
(Figures in $ millions)
Revenue $ 1,950
Cost of goods sold 1,030
Depreciation 350
Interest expense 240

a&b. What is shareholders’ equity in 2015 and 2016? (Enter your answers in millions.)

c&d. What is net working capital in 2015 and 2016? (Enter your answers in millions.)

e. What are taxes paid in 2016? Assume the firm pays taxes equal to 35% of taxable income. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

f. What is cash provided by operations during 2016? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

g. Net fixed assets increased from $800 million to $900 million during 2016. What must have been South Sea’s grossinvestment in fixed assets during 2016? (Enter your answer in millions.)

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Expert Solution

South Sea Baubles
Shareholder's Equity
2015 2016
Amt (In million) Amt (In million)
Current Assets $                                      90.00 $               140.00
Net Fixed Assets $                                    800.00 $               900.00
a & b Total=(A) $                                    890.00 $            1,040.00
Less:
Current Liabilities $                                      50.00 $                  60.00
Long Tem Debts $                                    600.00 $               750.00
Total=(B) $                                    650.00 $               810.00
Shareholder's Equity(A)-(B) $                                    240.00 $               230.00
c &d Net Working Capital=Current Assets-Current Liabilities
Net Working Capital
$                                2,015.00 $            2,016.00
Amt (In million) Amt (In million)
Current Assets=(A) $                                      90.00 $               140.00
Current Liabilities=(B) $                                      50.00 $                  60.00
Net Working Capital=(A)-(B) $                                      40.00 $                  80.00
Net Income Statement
Amt(In Million)
Revenue=(A) $                                1,950.00
Cost of goods sold=(B) $                                1,030.00
Gross Margin(C )=(A)-(B) $                                    920.00
Less:
Depreciation=(D) $                                    350.00
Interest Expense=(E ) $                                    240.00
EBT=(F)=(C )-(D )-(E ) $                                    330.00
Tax=(G )=(F)*35% $                                    115.50
Net Income=(F )-(G ) $                                    214.50
e) Taxes paid in 2016= $                                    115.50
f) Cash provided by operation
Net Income $                                    214.50
Add: Depreciation $                                    350.00
Less:Increase in Current Assets $                                     -50.00
Add: Increase in Current Liabilities $                                      10.00
Cash provided by operation $                                    524.50
g) Gross Investment
Increase in net fixed assets $                                    100.00
Add: Depreciation $                                    350.00
Gross Investment $                                    450.00

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