# Principles of Finance I Spreadsheet Problem 2-14 Grantham University

(2-14) Begin with the partial model in the file Ch02 P14 Build a Model.xls on the textbook’s            Web site.

a.       Cumberland Industries’s 2010 sales were \$455,000,000; operating costs (excluding depreciation) were equal to 85%  of sales; net fixed assets were \$67,000,000; depreciation amounted to 10% of net fixed assets; interest expenses were \$8,550,000; the state-plus-federal corporate tax rate was 40%; and Cumberland paid 25% of its net income out in dividends.  Given this information, construct Cumberland’s 2010 income statement.  Also calculate total dividends and the addition to retained earnings.  (Hint: Start with the partial model in the file and report all dollar figures in thousands to reduce clutter.)

b.      Cumberland Industries’s partial balance sheets are shown below.  Cumberland issued \$10,000,000 of new common stock in 2010.  Using this information and the results from a part a, fill in the missing values for common stock, retained earnings, total common equity, and total liabilities and equality.

Cumberland Industries: Balance Sheets as of December 31 (Thousands of Dollars)

2010                                        2009

Assets

Cash                                                                            \$91,450                                   \$74,625

Short-term investments                                               11,400                                    15,100

Accounts receivable                                                    108,470                                   85,527

Inventories                                                                    38,450                                   34,982

Total current assets                                       \$249,770                                \$210,234

Net fixed assets                                                            67,000                                   42,436

Total assets                                                                \$316,770                                \$252,670

2010                                        2009

Liabilities and Equity

Accounts payable                                                        \$30,761                                   \$23,109

Accruals                                                                      30,405                                    22,656

Notes payable                                                             12,717                                    14,217

Total current liabilities                                    \$73,883                                   \$59,982

Long-term debt                                                           80,263                                    63,914

Total liabilities                                  \$154,146                                 \$123,896

Common stock                                                                      ?                                               \$90,000

Retained earnings                                                       _____?                                                38,774

Total common equity                                                ?                                             \$128,774

Total liabilities and equity                                           _____?                                             \$252,670

c.        Construct the statement of cash flows for 2010.

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