You have just been hired as a financial analyst for a company called Basel Industries. Unfortunately, company headquarters (where all of the firm’s records are kept) have been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statement for the year that has just ended. The firm had $100,000 in the bank at the end of the prior year. In addition, its net working capital accounts, except cash, remained constant during the year. The company earned $5 million in net income during the year and but only paid $750,000 in dividends to common shareholders. Throughout the year, Basel Industries purchased $5.5 million of machinery that was needed for a new project. You have just been spoken to the firm’s accountants and learnt that annual depreciation expense for the year is $450,000; however, the purchase price for the machinery represents additions to property, plant and equipment before depreciation. The only financing done by the firm was to issue long-term debt of $1 million at a 6% interest rate. Determine the cash balance at the end of the year. Recreate the firm’s cash flow statement to arrive at your answer.
You have just been hired as a financial analyst for a company called Basel Industries. Unfortunately, company headquarters (where all of the firm’s records are kept) have been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statement for the year that has just ended. The firm had $100,000 in the bank at the end of the prior year. In addition, its net working capital accounts, except cash, remained constant during the year. The company earned $5 million in net income during the year and but only paid $750,000 in dividends to common shareholders. Throughout the year, Basel Industries purchased $5.5 million of machinery that was needed for a new project. You have just been spoken to the firm’s accountants and learnt that annual depreciation expense for the year is $450,000; however, the purchase price for the machinery represents additions to property, plant and equipment before depreciation. The only financing done by the firm was to issue long-term debt of $1 million at a 6% interest rate. Determine the cash balance at the end of the year. Recreate the firm’s cash flow statement to arrive at your answer.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- You have just been hired as a financial analyst for a company called Basel Industries.
- Unfortunately, company headquarters (where all of the firm’s records are kept) have been destroyed by fire.
- So, your first job will be to recreate the firm’s cash flow statement for the year that has just ended.
- The firm had $100,000 in the bank at the end of the prior year.
- In addition, its net working capital accounts, except cash, remained constant during the year.
- The company earned $5 million in net income during the year and but only paid $750,000 in dividends to common shareholders.
- Throughout the year, Basel Industries purchased $5.5 million of machinery that was needed for a new project.
- You have just been spoken to the firm’s accountants and learnt that annual
depreciation expense for the year is $450,000; however, the purchase price for the machinery represents additions to property, plant and equipment before depreciation. - The only financing done by the firm was to issue long-term debt of $1 million at a 6% interest rate.
- Determine the cash balance at the end of the year. Recreate the firm’s cash flow statement to arrive at your answer.
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