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Benson Inc.docx

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Ryerson University
FIN 300
Tsogbadral Galaabaatar

Benson Inc. shows the following information on its 2012 income statement. AccountBalances Sales$850,000 Cost Of Goods Sold$390,000 Other expenses$71,000 Depreciation Expense $58,000 Interest Expense$52,000 Taxes$121,000 Dividends$48,000 In addition, you are told that the firm issued $24,500 in new equity during 2012, and redeemed $31,500 in outstanding long-term debt. a) What is the 2012 operating cash flow? Operating cash flow = $236,500 Marking Your answer was: $236,500.00 The correct answer was: $268,000.00 To calculate operating cash flow, we want to calculate revenues minus costs, but we don't want to include depreciation, since it's not a cash outflow, and we don't want to include interest because it's a financing expense. We do want to include taxes, because taxes are paid in cash. Therefore, we get : Operating cash flow = Sales - Cost of goods sold - Other expenses - Taxes = $850,000 - $390,000 - $71,000 - $121,000 = $268,000 You will lose 2 marks for this part. b) What is the 2012 cash flow to creditors? Cash flow to creditors = $20,500 Marking Your answer was: $20,500.00 The correct answer was: $83,500.00 Remember that if outstanding long-term debt is redeemed, it will decrease net new borrowing. Therefore, net new borrowing was -31,500, not 31,500. You will lose 2 marks for this part. c) What is the 2012 cash flow to shareholders? Cash flow to shareholders = $23,500 Marking Your answer was: $23,500.00 Congratulations! You have entered the correct answer. d) If net fixed assets increased by $21,000 during the year, what was the addition to NWC? Adding to NWC = $363,900 Marking Your answer was: $363,900.00 The correct answer was: $82,000.00 The calculation for the additions to net working capital must be done in a number of steps. Firs
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