1. In Year 2, if Green Caterpillar has 25,000 shares of preferred stock issued and outstanding, then each preferred are should expect to receive ________ in annual dividends.

Options: $12 or $24 or $30 or $18

2. If Green Caterpillar has 200,000 shares of common stock issued and outstanding, then the firms earnings per share (EPS) is expected to change from ___(A)___ in Year 1 to_(B)_____ in Year 2.

Option A: $2.82 or $7.20 or $8.00 or $4.32

Option B: 8.93 or 5.36 or 3.86 or 10.50

3. Green Caterpillars before interest, taxes, depreciation and amortization (EBITDA) value changed from _(A)_____ in Year 1 to__(B)___ in Year 2.

Option A: 2,000,000 or 2,464,000 or 9,600,000 or 2,176,000

Option B: $2,500,000 or 3,171,000 or 12,815,000 or 11,071,000

4. It is_(A)____ to say that Green Caterpillars net inflows and outflows of cash at the end of Years 1 and 2 are equal to the companys annual contribution to retained earnings. This is because __(B)____ of the item reported in the income statement involve payments and receipts of cash.

Option A: correct or incorrect

Option B: all but one or all

Ch 02: Homework Assignment - Financial Statements, Cash Flow, and Taxes X common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm's revenues and expenses to the period in which they were incurred, not necessarily when cash was received or paid. Investors and analysts use the information given in the income statement and other financial statements and reports to evaluate the company's financial performance and condition. Consider the following scenario: Green Caterpillar Garden Supplies Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next year. 1. Green Caterpillar is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). 2. The company's operating costs (excluding depreciation and amortization) remain at 80% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company's tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Green Caterpillar expects to pay $300,000 and $481,950 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Green Caterpillar, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Ch 02: Homework Assignment - Financial Statements, Cash Flow, and Taxes Green Caterpillar Garden Supplies Inc. Income Statement For Year Ending December 31 Year 2 (Forecasted) Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Year 1 $10,000,000 8,000,000 400,000 $1,600,000 160,000 1,440,000 Operating income (or EBIT) Less: Interest expense Pre-tax income (or EBT) Less: Taxes (40%) 576,000 Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less: Common stock dividends Contribution to retained earnings $864,000 300,000 564,000 388,800 $175,200 Given the results of the previous income statement calculations, complete the following statements: In Year 2, if Green Caterpillar has 25,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Green Caterpillar has 200,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 1 to in Year 2. Green Caterpillar's before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 1 to in Year 2. It is to say that Green Caterpillar's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings. This is because of the item reported in the income statement involve payments and receipts of cash