2010 Consolidated Statements of Income Dollars in millions Operating revenues Wireless service Voice Data $ 53,510 28,315 27,479 3,935 11,041 124,280 52,263 33,065 19,379 104,707 19,573 Directory Other Total operating revenues Operating expenses Cost of services and sales Selling, general and administrative Depreciation and amortization Total operating expenses Operating income Other income (expense) Interest expense Equity in net income of affiliates Other income, net Total other income (expense) Income from continuing operations before income taxes Income tax (benefit) expense Income from continuing operations Income from discontinued operations, net of tax Net income (3,094) 762 897 (1,435) 18,138 (1,262) 19,400 779 $ 20,179 Type here to search Consolidated Balance Sheets - in millinne avrant nar ehare sme 2010 2009 $ 8,196 19,055 4,086 72 2,542 33,951 $ 8,361 20,260 4,170 1,681 2,479 36,951 64,720 58,971 Net income $ 20,179 Consolidated Balance Sheets - Liabilities and Equity Sections Dollars in millions except per share amounts, December 31 Current liabilities Debt maturing within one year Accounts payable and accrued liabilities Advanced billed and customer deposits Accrued taxes Dividends payable Total current liabilities Long-term debt Deferred credits and other noncurrent liabilities Deferred income taxes Postemployment benefit obligation Other noncurrent liabilities Total deferred credits and other noncurrent liabilities Stockholders' equity Common stock ($1 par value, 14,000,000,000 authorized at December 31, 2010 and 2009; issued 6,495,231,088 at December 31, 2010 and 2009) Additional paid-in capital Retained earnings Treasury stock (584,144,220 at December 31, 2010 and593,300,187 at December 31, 2009, at cost) Accumulated other comprehensive income Noncontrolling interest Total stockholders' equity Total liabilities and stockholders' equity 2010 Consolidated Statements of Stockholders' Equity - Excerpts Amount in millions except per share amounts, December 31 Shares Amounts Type here to search + 2 + O2 22,070 28,803 12,743 63,616 23,579 27,847 13.226 64,652 6,495 6,495 91,731 91,707 31,792 21,944 (21,083) (21.260) 2,712 2,678 303 425 111,950 101,989 $ 268,488 $ 268,312 Business Course Return to course Total stockholders' equity 111 Total liabilities and stockholders' equity Consolidated Statements of Stockholders' Equity - Excerpts 2010 Amount in millions except per share amounts, December 31 Shares Amounts Common Stock Balance at beginning of year 6,495 $ 6,495 Issuance of shares Balance at end of year 6,495 $6,495 Treasury Shares Balance at beginning of year (593) $ (21,260) Purchase of shares Issuance of shares 177 Balance at end of year (584) (21,083) Retained Earnings Balance at beginning of year $ 21,944 Net income ($3.35 per share) 19,864 Dividends to stockholders ($1,69 per share) (9,985) Other (31) Balance at end of year $31,792 (a) How much interest expense did AT&T incur during 2010? $ 3,094 million (b) What is the book value of AT&T's interest-bearing debt at the end of 2010? 67,167 million Type here to search ALLIE WEENS $ 73,081 VI ZUIU! million Average debt for 2010? o * million (c) Estimate AT&T's 2010 pretax cost of debt capital. (Round your answer to one decimal place.) 0 X % (d) Estimate AT&T's 2010 effective (that is, average) tax rate from information in its income statement. (Round your answer to one decimal place. 6.37 X % (e) Using your rounded answer from (c) above, estimate AT&T's 2010 after-tax cost of debt capital. The company's statutory tax rate is: 35% (Rour 6.5 X % Why is appropriate to use the company's statutory rate for computing its cost of debt capital? Choose all that apply yes . The statutory rate should be used because interest expense is deductible for tax purposes and therefore the after-tax cost of debt yes Using the effective rate in this case would inflate the true cost of borrowing. no . We should actually use an average rate using the statutory rate and the effective rate. Type here to search