Ch 03- Chapter Problems1. Cute Camel is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings beforeinterest and taxes (EBIT).2. The company's operating costs (excluding depreciation and amortization) remain at 70% of net sales, and its depreciation andamortization expenses remain constant from year to year.3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT).4. In Year 2, Cute Camel expects to pay $100,000 and $1,281,375 of preferred and common stock dividends, respectively.Complete the Year 2 income statement data for Cute Camel, then answer the questions that follow. Be sure to round each dollar value to the nearestwhole dollar.Net salesLess: Operating costs, except depreciation and amortizationLess: Depreciation and amortization expensesOperating income (or EBIT)Less: Interest expensePre-tax income (or EBT)Less: Taxes (25%)Earnings after taxesLess: Preferred stock dividendsEarnings available to common shareholdersLess: Common stock dividendsContribution to retained earningsCute Camel Woodcraft CompanyIncome Statement for Year Ending December 31Year 1$15,000,00010,500,000600,000$3,900,000390,0003,510,000877,500$2,632,500100,0002,532,5001,053,000$1,479,500Year 2 (Forecasted)$600,000$$$1,822,062 Given the results of the previous income statement calculations, complete the following statements:• In Year 2, if Cute Camel has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receivein annual dividends.• If Cute Camel has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change fromin Year 1 toin Year 2.• Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed fromin Year 2.in Year 1 to. It isto say that Cute Camel's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annualcontribution to retained earnings, $1,479,500 and $1,822,062, respectively. This is becauseof the items reported in the incomestatement involve payments and receipts of cash.

As per the given information: To complete the Year 2 Income statement, we have been provided with…

sults of the previous income statement calculations, complete the following statements: In Year 2, if Cute Camel has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Cute Camel has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 1 to in Year 2. Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2. It is in Year 1 to to say that Cute Camel's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $1,479,500 and $1,822,062, respectively. This is because of the items reported in the income. statement involve payments and receipts of cash.

sults of the previous income statement calculations, complete the following statements: In Year 2, if Cute Camel has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Cute Camel has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 1 to in Year 2. Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2. It is in Year 1 to to say that Cute Camel's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $1,479,500 and $1,822,062, respectively. This is because of the items reported in the income. statement involve payments and receipts of cash.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 20P

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