Return to Coute Estimating Cost of Debt Capital The December 31, 2015, partial financial statements taken from the annual report for AT&T Inc. (T) follow. Consolidated Statements of Income Dollars in millions except per share amounts 2015 2014 Operating revenues Service $ 131,677 $118,437 Equipment 15,124 14,010 Total operating revenues 146,801 132,447 Operating expenses Equipment 19.268 18,946 Broadcast. programming and operations 11.996 4,075 Other cost of services (exclusive of depreciation and amortization show separately below) 35,782 37.124 Selling general and administrative 32.954 39.697 Abandonment of network assets 2.120 Depreciation and amortization 22,016 18,273 Total operating expenses A 122.016 120.235 Operating income 24.785 12,212 Other income (expense): Interest expense (4.120) (3.613) Equity in net income of affiliates 79 175 Other income (expense) - net (52) 1,581 Total other income (expense) (4,093) (1,857) Income before income taxes 20.692 10.355 Income tax expense 7.005 3.619 Net Income $ 13.687 $6.736 Consolidated Balance Sheets - Liabilities and Equity Sections W 99. 2015 2014 $7636 30.372 4,62 2.176 2.950 47816 118.515 56056 23,992 4,105 1.091 2.438 37.282 75.778 Consolidated Balance Sheets - Llabilities and Equity Sections Dollars in millions except per share amounts. December 31 Current Rates Debt man within one year Accounts payable and accrued liabilities Advanced billed and customer deposits Accrued taxes Dividends payable Total current abilities Long term debe Deferred credits and other noncurrent liabilities: Deferred income taxes Post employment benefit obligation Other noncurrent liabilities Total deferred credits and other noncurrent liabilities Stockholders' equity Common stock (51 par value 14,000,000,000 authorized at December 31, 2015 and 2014 issued 6,405.231,088 at December 31, 2015 and 2014) Additional paid in capital Retained earnings Treasury stock (350.291.239 at December 31, 2015 and 1,308,318.131 at December 31, 2014 at cost) Accumulated other comprehensive income Noncontrolling interest Total stockholders equity Total liabilities and stockholders equity 56.181 34.262 22.250 38.436 37.079 17.980 93.504 112.701 6,495 6.495 89,763 91.108 33,671 31,081 (12.592) (47.029 5.334 8,061 969 554 123,640 90.270 $ 402.672 $296.834 Total Stockholders equity Total liabilities and stockholders' equity 2015 Shares Amounts 6,495 $ 6,495 6,495 $ 6,495 $ 91.108 (1.597) 252 $ 89,763 Consolidated Statements of Stockholders' Equity - Excerpts Amount in millions except per share amounts. December 31 Common Stock Balance at beginning of year Issuance of stock Balance at end of year Additional Paid-In-Capital Balance at beginning of year Issuance of treasury stock Share-based payments Change related to acquisition of interests held by noncontrolling owners Balance at end of year Retained Earnings Balance at beginning of year Net income attributable to AT&T (52.37. $1.24 and $3.42 per diluted share) Dividends to stockholders (51.89, $1.85 and $1.81 per share) Balance at end of year Treasury stock Balance at beginning of year Repurchase of common stock Issuance of treasury stock Balance at end of year $31.081 13.345 (10.755) $ 33,671 (1.308) $(47,029) (8) (278) 966 34 715 (350) $(12.592) #mybusinesscourse.com/platform/mod/quu/attempt.php?attempt=49524188cmid=263146&page=4 Return to course (a) How much interest expense did AT&T incur during 2015? 0 million (b) What is the book value of AT&T's interest-bearing debt at the end of 2015? 0 million $ At the beginning of 2015? $ 0 million Average debt for 2015? (Round to the nearest whole number) $ 0 million () Estimate AT&T's 2015 pretax cost of debt capital. Round your answer to one decimal place. 0 % (d) Estimate AT&T's 2015 effective that is, average) tax rate from information in its income statement Round your answer to one decimal place. 096 company Return to Coute Estimating Cost of Debt Capital The December 31, 2015, partial financial statements taken from the annual report for AT&T Inc. (T) follow. Consolidated Statements of Income Dollars in millions except per share amounts 2015 2014 Operating revenues Service $ 131,677 $118,437 Equipment 15,124 14,010 Total operating revenues 146,801 132,447 Operating expenses Equipment 19.268 18,946 Broadcast. programming and operations 11.996 4,075 Other cost of services (exclusive of depreciation and amortization show separately below) 35,782 37.124 Selling general and administrative 32.954 39.697 Abandonment of network assets 2.120 Depreciation and amortization 22,016 18,273 Total operating expenses A 122.016 120.235 Operating income 24.785 12,212 Other income (expense): Interest expense (4.120) (3.613) Equity in net income of affiliates 79 175 Other income (expense) - net (52) 1,581 Total other income (expense) (4,093) (1,857) Income before income taxes 20.692 10.355 Income tax expense 7.005 3.619 Net Income $ 13.687 $6.736 Consolidated Balance Sheets - Liabilities and Equity Sections W 99. 2015 2014 $7636 30.372 4,62 2.176 2.950 47816 118.515 56056 23,992 4,105 1.091 2.438 37.282 75.778 Consolidated Balance Sheets - Llabilities and Equity Sections Dollars in millions except per share amounts. December 31 Current Rates Debt man within one year Accounts payable and accrued liabilities Advanced billed and customer deposits Accrued taxes Dividends payable Total current abilities Long term debe Deferred credits and other noncurrent liabilities: Deferred income taxes Post employment benefit obligation Other noncurrent liabilities Total deferred credits and other noncurrent liabilities Stockholders' equity Common stock (51 par value 14,000,000,000 authorized at December 31, 2015 and 2014 issued 6,405.231,088 at December 31, 2015 and 2014) Additional paid in capital Retained earnings Treasury stock (350.291.239 at December 31, 2015 and 1,308,318.131 at December 31, 2014 at cost) Accumulated other comprehensive income Noncontrolling interest Total stockholders equity Total liabilities and stockholders equity 56.181 34.262 22.250 38.436 37.079 17.980 93.504 112.701 6,495 6.495 89,763 91.108 33,671 31,081 (12.592) (47.029 5.334 8,061 969 554 123,640 90.270 $ 402.672 $296.834 Total Stockholders equity Total liabilities and stockholders' equity 2015 Shares Amounts 6,495 $ 6,495 6,495 $ 6,495 $ 91.108 (1.597) 252 $ 89,763 Consolidated Statements of Stockholders' Equity - Excerpts Amount in millions except per share amounts. December 31 Common Stock Balance at beginning of year Issuance of stock Balance at end of year Additional Paid-In-Capital Balance at beginning of year Issuance of treasury stock Share-based payments Change related to acquisition of interests held by noncontrolling owners Balance at end of year Retained Earnings Balance at beginning of year Net income attributable to AT&T (52.37. $1.24 and $3.42 per diluted share) Dividends to stockholders (51.89, $1.85 and $1.81 per share) Balance at end of year Treasury stock Balance at beginning of year Repurchase of common stock Issuance of treasury stock Balance at end of year $31.081 13.345 (10.755) $ 33,671 (1.308) $(47,029) (8) (278) 966 34 715 (350) $(12.592) #mybusinesscourse.com/platform/mod/quu/attempt.php?attempt=49524188cmid=263146&page=4 Return to course (a) How much interest expense did AT&T incur during 2015? 0 million (b) What is the book value of AT&T's interest-bearing debt at the end of 2015? 0 million $ At the beginning of 2015? $ 0 million Average debt for 2015? (Round to the nearest whole number) $ 0 million () Estimate AT&T's 2015 pretax cost of debt capital. Round your answer to one decimal place. 0 % (d) Estimate AT&T's 2015 effective that is, average) tax rate from information in its income statement Round your answer to one decimal place. 096 company