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6. HyperVentures, Inc. (HV) has the following income statement, but lost some numbers. Fill in the missing numbers.

INCOME STATEMENT

For the three months ended December 31, 2017

Net Revenues $ 3,000,000

Cost of Goods Sold $

Gross Margin $ 1,950,000

Administrative Expenses $ 675,000

Sales and Marketing Expenses $ 900,000

Depreciation $ 235,000

Operating Profit $

Interest Expense $

Earnings Before Taxes $ 50,000

a.What is HVs EBIT?

b. What is HVs EBITDA?

c.What is HVs Net Income? Assume their tax rate is 20%.

7. Suppose HV received an equity investment sufficient for them to pay off all debts. Then what would their EBITDA be?

8. Treating all operating expenses as fixed costs, what dollar volume does HV need to sell to reach breakeven?

9. HVs P&L was created using accrual accounting. If HV used cash accounting, and their accounts payable increased by $10,000 and their accounts receivable increased by $20,000, what would their cash profit be? [Hint: recall that in cash accounting, expenses arent counted until you write the check for them, and sales arent counted until the customer pays for them. How does this change HVs income and expenses?

10. Another way of looking at profitability for a company is to calculate their NOPAT: net operating profit after taxes. Since we know what operating profit is, we should be able to calculate NOPAT for HV. What is HVs NOPAT for 2017? Based on what is left out of the NOPAT calculation (interest expenses), what does NOPAT tell us and why would we be interested in it?

1. Another way of looking at profitability for a company is to calculate their NOPAT: Net Operating Profit After Taxes. Since we know what operating profit is (see question 6). we should be able to calculate NOPAT for HV.
   1. Using 20% as HVs tax rate, what is HVs NOPAT for 2017?

2. Based on what is left out of the NOPAT calculation (interest expenses), what does NOPAT tell us and why would we be interested in it?

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