Question

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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Answer 1

	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