Finance assignment

QUESTION 1

ABC's EBIT is $6 million. The depreciation expense is $0.5 million and interest expense is $0.5 million. The corporate tax rate is 30%. The company has 7 million in operating current assets and $3 million operating current liabilities. It has $12 million in net plant and equipment. The after-tax cost of capital (WACC) is 12%. Assume that the only non-cash item is depreciation. The total net operating capital last year was $15 million.

What was the company’s free cash flow for the year?

QUESTION 2

Based on the following information, Compute the transfer to Retained Earnings for Year 2006. Assume a tax rate of 34%.

	Year 2006
Sales	$4800
Depreciation	577
COGS	1582
Other Expenses	580
Interest	769
Cash	2107
A/R	2789
Short-term Notes Payable	407
Long-term Debt	7056
Net Fixed Assets	17669
A/P	2213
Inventory	4959
Dividends	612

QUESTION 3

Calculate the shareholders' equity from the given information:

Cash	$2,155
A/R	$3,142
Notes Payable	$382
Long-term Debt	$8,232
Net Fixed Assets	$18,091
A/P	$2,146
Inventory	$5,096

QUESTION 4

The interest payments are tax-deductible.

True

False

QUESTION 5

1. ABC recently reported $40,987 of sales, $16,382of operating costs other than depreciation, and $5,770 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding that carry a 5% interest rate. How much was the firm's taxable income, or earnings before taxes (EBT)?

Hint: Interest rate = Bonds outstanding * interest rate

QUESTION 6

1. ABC company had a taxable income of $594,342 from operations after all operating costs but before interest charges of $53,502, dividends received of $40,958, dividends paid of $10,000, and income taxes. What is the firm's income tax liability?

QUESTION 7

1. Donner United has total owner's equity of $18,800. The firm has current assets of $23,100, current liabilities of $12,200, and total assets of $36,400. What is the value of the long-term debt?

		$5,400
		$12,500
		$43,000
		$29,800
		$13,700

1 points

QUESTION 8

1. An investor recently purchased a corporate bond that yields 11%. The investor is in the 33% combined federal and state tax bracket. What is the bond's after-tax yield?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

QUESTION 9

1. Fixed assets includes which of the below?

		Land
		Inventory
		Accounts Receivable
		Long-term Debt

1 points

QUESTION 10

1. ABC Corporation had $91,680 of taxable income. Compute the tax liability.

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 11

1. ABC corporation has operating income of $29,585. The company's depreciation expense is $13,569. The company is all equity-financed and it faces a tax rate of 38%. What is the company's net cash flow?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 12

1. ABC company had a taxable income of $206,042 from operations after all operating costs but before interest charges of $55,746, dividends received of $60,202, dividends paid of $5,000, and income taxes. What is the firm's income tax liability?

Hint: use the tax table to compute taxes.

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 13

1. What is sales revenue, minus cost of goods sold and operating expenses, known as for income statement purposes?

		Earnings before Interest and Taxes
		Net Income
		Net Profit
		Dividends

1 points

QUESTION 14

1. Corporate Bonds issued by ABC Corporation currently issued 14.7%. Municipal Bonds of equal risk currently yield 7.5%. At what tax rate would an investor be indifferent between these two bonds?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

QUESTION 15

1. During 2007, ABC had sales of $79,365. Cost of goods sold, administrative expenses and selling expenses, and depreciation expenses were $23,155, $6,006, and $10,304, respectively. In addition, the company had an interest expense of $4,131, and a tax rate of 38%. The company paid$8,914 as dividends. If the retained earnings is 2006 were $59,011, what are the retained earnings in 2007?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 16

1. In its most recent financial statements, ABC Inc. reported $43 of net income and $725 of retained earnings. The previous retained earnings were $818. How much in dividends was paid to shareholders during the year?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 17

1. JBS Inc. recently reported net income of $4,750 and depreciation of $885. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets.

		$5635.00
		$5353.25
		$5085.29
		$5916.00
		$4831.31

1 points

QUESTION 18

1. ABC company had a taxable income of $560,449 from operations after all operating costs but before interest charges of $52,657, dividends received of $72,313, dividends paid of $10,000, and income taxes. What is the firm's after-tax income?

Hint: first use the tax table to compute taxes before calculating the after-tax income.

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 19

1. Culligan, Inc., has current assets of $5,000, net fixed assets of $23,000, current liabilities of $4,300, and long-term debt of $13,000. How much in net working capital?

Hint: Net Working Capital = CA - CL

		$700
		$10,700
		$28,000
		$4,300
		$5,000

1 points

QUESTION 20

1. Culligan, Inc., has current assets of $22,688, net fixed assets of $145,036, current liabilities of $10,778, and long-term debt of $57,535. What is the shareholders' equity?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 21

1. The dividend payments are tax-deductible.

True

False

1 points

QUESTION 22

1. ABC Inc. recently reported net income of $3,054 and depreciation of $365. What is the net cash flow?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 23

1. The Herrara Co., had $273,000 in taxable income. Compute the company s income taxes. What is the average tax rate?

		32.86%
		39%
		24.45%
		34.86%

1 points

QUESTION 24

1. ABC's EBIT is $9 million. The depreciation expense is $0.5 million and interest expense is $0.5 million. The corporate tax rate is 30%. The company has 12 million in operating current assets and $6 million operating current liabilities. It has $5 million in net plant and equipment. The after-tax cost of capital (WACC) is 15%. Assume that the only non-cash item is depreciation. The total net operating capital last year was $8 million.

What was the company’s economic value added (EVA)?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $1200000.345 then enter as 1200000.345 in the answer box.