Question

Whistler's sales for this past year were $21,381. The interest expense was $248, costs of goods...

Whistler's sales for this past year were $21,381. The interest expense was $248, costs of goods sold were $9,784, selling and general expenses were $1,208, depreciation was $811, and the addition to retained earnings was $325. The firm sold $500 of new stock shares and repurchased $125 of outstanding shares.

What was the cash flow to stockholders if the tax rate was 34 percent?

Question 21 options:

$208.28

$725.50

$202.72

$235.55

$670.25
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Homework Answers

Answer #1

Taxable Income will be = Sales - Cost of Goods Sold - Selling and General Expenses - Depreciation - Interest
= $21,381 - $9,784 - $1,208 - $811 - $248
=$9,330

Taxes = Taxable Income * 34%
= $9,330 * 34%
= $3,172.20

Net Income = Taxable Income – Taxes
= $9,330 - $3,172.20
= $6,157.80

Addition to Retained Earnings = Net Income - Dividends
$325 = $6,157.80 - Dividends
Dividends = $5,832.80

Net New Equity = Issuance of Shares - Shares Repurchased
= $500 - $125
= $375

Cash Flows to Stockholders = Dividends - Net New Equity
Cash Flows to Stockholders = $5,832.80 - $375
Cash Flows to Stockholders = $5,457.80

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