Use the following for questions 7-9

Income Statement Year Ending December 31, 2011			Balance Sheet as of December 31 2011 2010
Sales	$20		Current Assets	15	12
Cost of goods sold	8		Total assets	82	76
Depreciation expense	4		Current Liabilities	12	10
Interest expense	2		Long-term debt	30	30
Taxable Income	8		Total liabilities	42	40
Taxes	3		Common Stock	10	10
Net income	$5		Retained earnings	10	6
			Total Stockholders equity	40	36
Dividends paid	$1		Total liabilities and equity	82	76

What is the ROE? Use averages where appropriate. Look at my notes. In finance, when combining an income statement item with a balance sheet item, you need to use the average of the balance sheet item.

What is the change in working capital? Recall working capital is current assets minus current liabilities. You need to find the change from 2010 to 2011.

If capital expenditures were $2 in 2011, what is the FCFE? There was no debt issued or retired. Use FCFE = Net Income + depreciation Cap. Expend. change in working capital principal debt repayments + new debt issues.