EBIT

| December 7, 2015

The balance sheet and income statement shown below are for Alcoa. Note that the firm has no amortization charges and it does not lease any assets and none of its debt must be retired during the next 5 years, although the notes payable will be rolled over.

Balance Sheet (Millions of $)

Assets 2007

Cash and securities $1,554.0

Accounts receivable 9,660.0

Inventories 14,440.0

Total current assets $25,654.0

Net plant and equipment 17,346.0

Total assets $43,000.0

Liabilities and Equity

Accounts payable $7,980.0

Notes payable 6,880.0

Accruals 4,620.0

Total current liabilities $19,480.0

Long-term bonds 10,920.0

Total debt $30,400.0

Common stock 3,360.0

Retained earnings 9,240.0

Total common equity $12,600.0

Total liabilities and equity $43,000.0

Income Statement (Millions of $) 2007

Net sales $58,800.00

Operating costs except depr´┐Żn $54,978.0

Depreciation $1,029.0

Earnings bef int and taxes (EBIT) $2,793.0

Less interest 1,050.0

Earnings before taxes (EBT) $1,743.0

Taxes $610.1

Net income $1,133.0

Other data:

Shares outstanding (millions) 175.00

Common dividends $509.83

Int rate on notes payable & L-T bonds 6.25%

Federal plus state income tax rate 35%

Year-end stock price $77.69

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