Cold Boxes Ltd. has 100 bonds outstanding (maturity value = $1,000). The nominal required rate of return on these bonds is curre

Answer:

The interest amounts to $1,000,000.

Explanation:

The standard format of an income statement includes:

Revenue/Sales (+)

Cost of Goods Sold (COGS) (-)

=Gross Profit

Marketing, Advertising, and Promotion Expenses (-)

General and Administrative (G&A) Expenses (-)

=EBITDA

Depreciation & Amortization Expense (-)

=Operating Income or EBIT

Interest (-)

Other Expenses (-)

=EBT (Pre-Tax Income)

Income Taxes (-)

=Net Income

For this case:

EBIT equals $6,000,000.

The interest is to be determined.

Tax is calculated as 0.40.

EBITDA stands at $3,000,000.

The interest formula is: interest = [EBITDA / (1 - tax)] - EBIT

Substituting values, interest = 3000000 / 0.60 - 6000000 = -$1,000,000.

With EBIT at 6 million, the interest is $1 million, and the tax amounts to 2 million (calculated as (EBIT - interest) * 0.40).

Thus, the net income is $3 million.

Response:

The cash collection totals $122,000

and the amount receivable as of August 31 stands at $97,000

Clarification:

For August, the anticipated cash collection is $122,000, while the receivables amount on August 31 is $97,000.

A cash collection schedule is included in the attached MS Excel file with this response.

Answer:

a. $37,560

Explanation:

The ending cash balance of $40,000 = Cash at start of month $52,000 + cash inflows during June of $532,160 - cash outflows of $581,720 +  New borrowing

⇔ $40,000 = $2,440 + new borrowing

⇔ New borrowing becomes  $40,000 - $2,440 = $37,560

To maintain a cash balance of $40,000, Skot must borrow $37,560 starting with $52,000.