Less: Common stock dividends Contribution to retained earnings 1,464,750 $2,620,250 Given the results of the previous income statement calculations, complete the following statements: 1,773,844 • In Year 2, if Cute Camel has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2. $3,194,281 • If Cute Camel has 500,000 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. • 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, $2,620,250 and $3,194,281, respectively. This is because of the items reported in the income statement involve payments and receipts of cash.
Less: Common stock dividends Contribution to retained earnings 1,464,750 $2,620,250 Given the results of the previous income statement calculations, complete the following statements: 1,773,844 • In Year 2, if Cute Camel has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2. $3,194,281 • If Cute Camel has 500,000 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. • 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, $2,620,250 and $3,194,281, respectively. This is because of the items reported in the income statement involve payments and receipts of cash.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
100%
Consider the following scenario:
Cute Camel Woodcraft Company’s income statement reports data for its first year of operation. The firm’s CEO would like sales to increase by 25% next year.
| 1. | Cute Camel is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). |
| 2. | The company’s operating costs (excluding depreciation and amortization) remain at 65% of net sales, and its depreciation and amortization 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 $1,773,844 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 nearest whole dollar.
Need help with Year 2 values and questions at bottom
Transcribed Image Text:Net sales
Less: Operating costs, except depreciation and amortization
Less: Depreciation and amortization expenses
Operating income (or EBIT)
Less: Interest expense
Pre-tax income (or EBT)
Less: Taxes (25%)
Earnings after taxes
Less: Preferred stock dividends
Earnings available to common shareholders
Less: Common stock dividends
Contribution to retained earnings
Year 1
$20,000,000
13,000,000
800,000
$6,200,000
620,000
5,580,000
1,395,000
$4,185,000
100,000
4,085,000
1,464,750
$2,620,250
Given the results of the previous income statement calculations, complete the following statements:
Year 2 (Forecasted)
$25,000,000
16,250,000
800,000
• Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from
in Year 2.
$7,950,000
1,192,500
6,757,500
1,689,375
$5,068,125
100,000
4,968,125
1,773,844
$3,194,281
• In Year 2, if Cute Camel has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive
in annual dividends.
If Cute Camel has 500,000 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.
in Year 1 to
• It is
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, $2,620,250 and $3,194,281, respectively. This is because
of the items reported in the income
statement involve payments and receipts of cash.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education