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Accounting Homework The Tree Corporation sold 200,000 units at a price of $5. Each unit cost $1.8 or 36% of sales to produce. The fixed costs are $75,000. Depreciation is $125,000. Interest expense is 12% of long-term debt. Dividends are going to be 10 per share. Tree has 250,000 outstanding shares. Accounts receivable increased by $35,000. Inventory increased by $180,000. Notes payable increased by $10,000. Accounts payable increased by $15,000. Their stock sells for $17.39. Sales Cost of goods sold Depreciation EBIT Interest EBT Taxes Net income Dividends Retained earnings NCF= Tax Table Taxable Income Tax Rate 0-50,000 15% 50,001-75,000 25% 75,001-100,000 34% 100,001-335,000 39% 335,001-10,000,000 34% Tax Liability $7,500 $13,750 $22,250 $113,900 $3,400,000 Cash Flows Operating activities Net Income Depreciation Accounts receivables Accounts payable Inventory Investment activities Ending fixed assets Beginning fixed assets Depreciation Financing activities Notes payable Long-term debt Common stock Dividends Tree Corporation 2000 Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment $ $ $ $ Total assets 2001 $ 1,445,000.00 15,000.00 110,000.00 70,000.00 195,000.00 $ 1,250,000.00 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total $ $ $ 10,000.00 25,000.00 35,000.00 Long-term debt $ 400,000.00 Owners' equity Common stock Retained earnings Total $ 500,000.00 $ 510,000.00 $ 1,010,000.00 Total liabilities and owners' equity 2000 2001 $ 1,445,000.00 The Tree Corporation expects that next year they will be able to sell 300,000 units at $6. They have 10 machines that can produce 20,000 units each. Variable cost will rise to $2.28 per unit or 38% of sales. Fixed cost will stay $75,000. Dividends are expected to be 25 per share. Each new machine will cost $200,000. New depreciation will be straight line for 10 years plus the $125,000. They can raise $30,000 more in notes payable. They plan to raise $300,000 in long-term debt. Accounts receivable are expected to increase by $10,000. Accounts payable are expected to increase by $15,000. Inventory is expected to increase by $45,000. They need to maintain at least $12,500 in cash. Sales Cost of goods sold Depreciation EBIT Interest EBT Taxes Net income Dividends Retained earnings NCF= Tree Corporation Current Benchmark 6.8 Quick 4.3 Inventory Turnover 2.6 Fixed asset turnover .7 Total asset turnover .5 Total debt to total asset .43 Times interest earned 5.3 Profit margin .242 ROA .149 ROE .205 P/E 17.7 Market/Book 3.1 Cash Flows Operating activities Net Income Depreciation Accounts receivables Accounts payable Inventory Investment activities Ending fixed assets Beginning fixed assets Depreciation Financing activities Notes payable Long-term debt Common stock Dividends Tree Corporation 2000 Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment $ $ $ $ Total assets 2001 Projected 2002 2001 Projected 2002 $ 1,445,000.00 15,000.00 110,000.00 70,000.00 195,000.00 $ 1,250,000.00 Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total $ $ $ 10,000.00 25,000.00 35,000.00 Long-term debt $ 400,000.00 Owners' equity Common stock Retained earnings Total $ 500,000.00 $ 510,000.00 $ 1,010,000.00 Total liabilities and owners' equity 2000 $ 1,445,000.00
