Question
In: Finance
During 2014, Raines Umbrella Corp. had sales of $666924. Cost of goods sold, administrative and selling...
During 2014, Raines Umbrella Corp. had sales of $666924. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $478699, $91112, and $84397, respectively. In addition, the company had an interest expense of $91184 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions. This means that if the company does not have any taxable income, they do not pay any tax.) Suppose Raines Umbrella Corp. paid out $51718 in cash dividends. If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what is the net new long-term debt?
Solutions
Expert Solution
| Calculation of the net new long term debt | |||||||
| Net new long term debt = Increase in total assets - Increase in current liabilities - Increase in retained earnings | |||||||
| Increase in total assets = $0 | |||||||
| Increase in current liabilities = $0 | |||||||
| Calculation of increase in retained earnings | |||||||
| Sales | $666,924.00 | ||||||
| Less : Cost of goods sold | $478,699.00 | ||||||
| Gross Margin | $188,225.00 | ||||||
| Less : Selling and admin.expense | $91,112.00 | ||||||
| Less : Depreciation Expense | $84,397.00 | ||||||
| Net Operating Income | $12,716.00 | ||||||
| Less : Interest Expense | $91,184.00 | ||||||
| Profit before tax | -$78,468.00 | ||||||
| Less : Tax @ 35% | $0.00 | ||||||
| Net Income (loss) | -$78,468.00 | ||||||
| Less : Dividend paid | $51,718.00 | ||||||
| Increase in retained earnings | -$130,186.00 | ||||||
| Net new long term debt = $0 - $0 - (-$1,30,186) | |||||||
| Net new long term debt = $1,30,186 | |||||||
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