It says the correct answer for #1 is "e" but I am not sure how they got that

1. Below are the abbreviated financial statements for Blue Mountain Company. Use this information for questions 7 and 8.

Blue Mountains Income 1996 Blue Mountains Balance Sheet

Sales $75,000 Assets 1995 1996 Liab&Equity 1995 1996

CGS 35,000 Cash $ 5,000 $ 6,000 A/P $ 32,000 $ 29,000

Depreciation 15,000 A/R $ 35,000 $ 36,000 N/P $ 30,000 $ 25,000

EBIT 25,000 Inventory $ 30,000 $ 20,000 LTD $ 28,000 $ 23,380

Interest 10,000 Fixed (NET) $ 60,000 $ 63,000 Equity $ 40,000 $ 47,620

EBT 15,000 Total $130,000 $125,000 Total $130,000 $125,000

Taxes (34%) $ 5,100

Net Income $ 9,900 Dividend payout ratio = 40% of Net Income

1. What was Blue Mountains 1996 inclusive cash flow from operations (including the changes in the appropriate balance sheet accounts)? Make sure you exclude interest from operating cash flow.

1. $34,900
2. $ 9,900
3. $39,900
4. $45,900
5. $40,900

2. Which one of the following statements about Blue Mountain is true?

1. In 1996, Blue Mountain must have repurchased $1,680 worth of common stock.
2. In 1996, Blue Mountain must have received $14,620 net from their long term bondholders.
3. In 1996, Blue Mountain must have paid $5,380 to their long term bondholders.
4. In 1996, Blue Mountain must have on net issued $5,940 worth of common stock.
5. In 1996, Blue Mountain must have net paid $2,280 to its common stockholders.