Bean business finance week 1

Calculating OCF. Hammett, Inc., has sales of $34,630, costs of $10,340, depreciation expense of $2,520, and interest expense of $1,750. If the tax rate is 35 percent, what is the operating cash flow, or OCF?
Operating cash flow $ 17283

Calculations:
Sales - Cost - Depreciation = EBIT(Earnings Before Interest Taxes –Depreciation Amortization)
34630 - 10340 - 2520 = 21770

EBIT - Interest = Taxable Income
21770 - 1750 = 20020

Taxes (35%) = 20020 x .35 = 7007

Net income: 20020 - 7007 = 13013

EBIT + depreciation - less taxes = OCF
21770 + 2520 - 7007 = 17283

Calculating Cash Flows. Weiland Co. shows the following information on its 2014 income statement: sales = $167,000; costs = $88,600; other expenses = $4,900; depreciation expense = $11,600; interest expense = $8,700; taxes = $18,620; dividends = $9,700. In addition, you’re told that the firm issued $2,900 in new equity during 2014, and redeemed $4,000 in outstanding long-term debt. a. Calculating Cash Flows. What is the 2014 operating cash flow? b. What is the 2014 cash flow to creditors? c. What is the 2014 cash flow to stockholders? d. If net fixed assets increased by $23,140 during the year, what was the addition to NWC?
Sales: $167,000
Costs: $88,600
Other Expenses: $ 4,900
Depreciation: $1,600
EBIT: $71,900
Interest expense: $8,700
Taxable Income: $63,200
Taxes: $18,620
Dividends: $9,700

a) What is the 2014 operating cash flow?
Operating cash flow = EBIT + Depreciation - taxes
$59,000 + 10,400 - 17,885 = $51,515

b) What is the 2014 cash flow to creditors?
Cash flow to creditors = Interest paid - Net new borrowing
$8,700 - (5,100) = $3,600

c) What is the 2014 cash flow to stockholders?
Cash flow to stockholders = Dividends paid - Net new equity
$9,700 - 3,450 = $6,250

d) If net fixed assets increased by $23,140 during the year, what was the addition to NWC?
Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
$3,600+ 6,250 = $9,850
Net capital spending