Consider a company with sales of $18,000.0 million, cost of goods sold of 42% of sales, other expenses including salaries

Consider a company with sales of $18,000.0 million, cost of goods sold of 42% of sales, other expenses including salaries ( we usually call this SG&A for selling, general and administrative) of 1750.0million, depreciation of 2250.0 million, and interest expense of 2300 million. tax rate =21%.

a. generate an income statement and show net income

b. what is the company's operating cash flow?

c. if there are 775.2 million shares outstanding, what is the EPS?

d. if the company has a payout ratio of 20%, what is the dividends per share?

Solutions

Expert Solution

a). Preparing the Income Statment :-

Particular	Amount in millions of $
Sales	18,000.00
Less: COGS [@42% of Sales]	(7,560.00)
Gross Profit	10,440.00
Less: Depreciation	(2,250.00)
Less:SG&A	(1,750.00)
EBIT	6,440.00
interest Expense	(2,300.00)
Taxable Income	4,140.00
Taxation (35%)	(869.40)
Net income	3,270.60

SO, Net Income is $3270.60 millions

b). - Operating cash flow = EBIT(1-Tax rate) + Depreciation

Operating cash flow = $6440 millions(1-0.21) + $2250 millions

Operating cash flow = $7,337.6 millions

c). Earnings per share(EPS) = Net income/No of shares outstanding

EPS = $3270.60 millions/775.2 million

EPS = 4.22 per share

d). Payout ratio = 20%

Dividend per share = EPS*Payout ratio

Dividend per share = $4.22*20%

Dividend per share = $0.84 per share

jeff jeffy answered 1 year ago

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