During 2018, Raines Umbrella Corp. had sales of $810,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $580,000, $90,000, and $135,000, respectively. In addition, the company had an interest expense of $91,000 and a tax rate of 21 percent. (Ignore any tax loss carryforward provisions and assume interest expense is fully deductible.) Suppose the company paid out $55,000 in cash dividends. If net capital spending and net working capital was zero, and if no new stock was issued during the year, what is the net new long-term debt

$6,000

Explanation:

The computation of the net new long term debt is as follows:

But before that following calculations to be done:

Sales $810,000

Less: COGS ($580,000)

Less: S&A Expenses ($90,000)

Less: Depreciation ($135,000)

EBIT $5,000

Less: Interest ($91,000)

Taxable Income ($86,000)

Less: Taxes(21%) $0

Net Income(loss) ($86,000)

Now

OCF = EBIT + Depreciation - Taxes

= $5,000 + $135,000 - $0

= $140,000

Change in NWC = Net capital spending = Net new equity = 0

Cash flow from assets = OCF - Change in NWC - Net capital spending

= $140,000 - $0 - $0

= $140,000

Cash flow to stockholders = Dividends - Net New Equity

= $55,000 - $0

= $55,000

Cash flow to creditors = Cash flow from assets - Cash flow to stockholders

= $140,000 - $55,000

= $85,000

Cash flow to creditors = Interest - Net new LTD

$85,000 = $91,000 - Net new LTD

So,

Net new LTD is

= $91,000 - $85,000

= $6,000

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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