2007

($ in millions except per share data)

Cash
A/R
Inventories
Other Current Assets
PP&E, Net
Goodwill
Other L/T Assets
Total Assets

567
5,197
4,096
877
10,778
31,193
15,285
67,993

Short Term borrowings

A/P
Accrued Liabilities
L/T Debt
Deferred Income Taxes
Other L/T Liabilities
Total Liabilities

8,107
4,065
4,914
12,902
4,876
5,834
40,698

Common Stock
Retained Earnings
Other Loss
Treasury Stock
Total Equity

23,445
12,209
(1,835)
(6,524)
27,295

Total Liab & Equity

67,993

Revenue
Net Income
Primary EPS

42,201
2,901
1.95

Profit Margin
Return on Equity
Return on Assets
LTD/Equity

6.9%
10.6%
4.3%
47.3%

KRAFT

2007

Change

ProForma

($ in millions except per share data)

Cash
A/R
Inventories
Other Current Assets
PP&E, Net
Goodwill
Other L/T Assets
Total Assets

567
5,197
4,096
877
10,778
31,193
15,285
67,993

Short Term borrowings

A/P
Accrued Liabilities
L/T Debt
Deferred Income Taxes
Other L/T Liabilities
Total Liabilities

8,107
4,065
4,914
12,902
4,876
5,834
40,698

Common Stock
Retained Earnings
Other Loss
Treasury Stock
Total Equity

23,445
12,209
(1,835)
(6,524)
27,295

Total Liab & Equity

67,993

Revenue
Net Income
Primary EPS

42,201
2,901
1.95

263.98

1,850.00

2,113.98

2,121.90

831
5,197
4,096
877
12,628
31,193
15,285
70,107.0
8,107
4,065
4,914
15,024
4,876
5,834
42,820

JOURNAL ENTRIES (000)

Cash
2,115,263,373
Discount
84,736,627
Bonds Payable

Interest Expense

Profit Margin
Return on Equity
Return on Assets
LTD/Equity

Cashflow ($000)
Issued Bonds
Bought PPE
Paid Bonds Interest
Savings
Tax Savings
Change in Cashflow

(7.92)

2,113.98

23,445
12,201
(1,835)
(6,524)
27,287
70,107.0

2,200,000,000

111,137,313
Cash
Discount B/P

104,500,000
6,637,313

6.9%
10.6%
4.3%
47.3%

2,115,263,373
(2,000,000,000)
(104,500,000)
250,000,000
3,218,684
263,982,057

(000)

n
i
pmt
fv
pv
Coupon Payment

Bond Math
20
2.625%
52,250,000
2,200,000,000
$2,115,263,373
Interest Expense

Amortization

Income Statement ($000)

Savings
Depreciation Expense
Interest Expense
Net Income Before Taxes
Taxes @28.9%
Net Income

250,000,000
(150,000,000)
(111,137,313)
(11,137,313)
3,218,684
(7,918,630)

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000
52,250,000

55,525,664
55,611,650
55,699,893
55,790,453
55,883,390
55,978,766
56,076,646
56,177,096
56,280,182
56,385,974
56,494,543
56,605,963
56,720,307
56,837,652
56,958,078
57,081,665
57,208,496
57,338,657
57,472,234
57,609,318

3,275,664
3,361,650
3,449,893
3,540,453
3,633,390
3,728,766
3,826,646
3,927,096
4,030,182
4,135,974
4,244,543
4,355,963
4,470,307
4,587,652
4,708,078
4,831,665
4,958,496
5,088,657
5,222,234
5,359,318

Carrying Value
2,115,263,373
2,118,539,037
2,121,900,686
2,125,350,579
2,128,891,032
2,132,524,422
2,136,253,188
2,140,079,834
2,144,006,929
2,148,037,111
2,152,173,086
2,156,417,629
2,160,773,592
2,165,243,899
2,169,831,551
2,174,539,629
2,179,371,294
2,184,329,791
2,189,418,448
2,194,640,682
2,200,000,000

If the company wants to raise exactly $2 billion, you should find the present value (cash received)
The same variables exist for this bond, which is 10 year bond paid semi-annually with a market ra
and a payment of $23.75 every 6 months (4.75%/2 * 1000). And we know that the future value of a
n
i
pmt
fv
pv

20
2.625%
23.75
1,000
$961.48

So we know that one bond will result in cash proceeds of $961.48. The company needs $2 billion. There
$2,000,000,000 =
$961.48

# of bonds needed to generate $2 billion

2,080,119.22

If the company issues 2,080,119.22 bonds, the journal

entry would be as follows:
Cash
Discount

2,000,000,000
80,119,221
Bonds Payable

the present value (cash received) for one bond.

aid semi-annually with a market rate of 2.625% semi-annually
we know that the future value of a bond is $1,000.

The company needs $2 billion. Therefore:

to generate $2 billion

2,080,119,221