Answer:
South Sea Baubles
1. Shareholders' equity in 2015 and 2016 = $300 and $260 respectively.
2. Net working capital in 2015 and 2016 = $25 and $110 respectively.
3. Taxes paid in 2016 = $84.
4. Cash provided by operations during 2016 = $666.
5. South Sea's gross investment in fixed assets = $100 ($105 - $95).
Explanation:
a) Data and Calculations:
BALANCE SHEET AT END OF YEAR (Figures in $ millions)
Assets 2015 2016
Current assets $ 105 $ 215
Net fixed assets 950 1,050
Total assets $1,055 $1,265
Current liabilities $ 80 $ 105
Long-term debt 675 900
Total liabilities $755 $1,005
Shareholders' equity $300 $260
Liabilities and Shareholders' Equity $1,055 $1,265
INCOME STATEMENT, 2016 (Figures in $ millions)
Revenue $ 2,025
Cost of goods sold 1,105
Gross profit $ 920
Depreciation 425
EBIT $495
Interest expense 255
Profit before taxes $240
Income taxes (35%) 84
Net Income $ 156
Cash provided by operations:
Net income = $156
Depreciation 425
Working capital:
Current assets 110
Current liabilities (25)
Net cash $666
