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Financial Management Decision Process Problems

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Question;Financial;Management Decision Process Problems;LO 2 4.;Per-Share Earnings and Dividends.;Suppose the firm in Problem 3 had 40,000 shares of common stock outstanding.;What is the earnings per share, or EPS, figure? What is the dividends per share;figure?;LO 1 5.Market Values and Book Values. Klingon;Widgets, Inc., purchased new cloaking machinery three years ago for $4 million.;The machinery can be sold to the Romulans today for $6.2 million. Klingon?s;current balance sheet shows net fixed assets of $2.8 million, current;liabilities of $710,000, and net working capital of $130,000. If all the;current assets were liquidated today, the company would receive $825,000 cash.;What is the book value of Klingon?s assets today? What is the market value?;LO 3 7.;Tax Rates. In Problem 6, what is;the average tax rate? What is the marginal tax rate?;Lo4 14Calculating Total Cash Flows. Sheffield Co.;shows the following information on its 2010 income statement: sales = $153,000;costs = $81,900, other expenses = $5,200, depreciation expense = $10,900;interest expense = $8,400, taxes = $16,330, dividends = $7,200. In addition;you?re told that the firm issued $2,600 in new equity during 2010, and redeemed;$3,900 in outstanding long-term debt.;b. The cash flow to creditors is the interest paid, minus any new borrowing.;Since the company redeemed long-term debt, the net new borrowing is negative.;So, the cash flow to creditors is;c. The cash flow to stockholders is the dividends paid minus any new equity.;So, the cash flow to stockholders is;d. In this case, to find the addition to NWC, we need to find the cash flow;from assets. We can then use the cash flow from assets equation to find the;change in NWC. We know that cash flow from assets is equal to cash flow to;creditors plus cash flow to stockholders. So, cash flow from assets is;LO 1 16. Preparing a Balance Sheet. Prepare a;balance sheet for Alaskan Orange Corp. as of December 31, 2010, based on the;following information: cash = $193,000, patents and copyrights = $847,000;accounts payable = $296,000, accounts receivable = $253,000, tangible net fixed;assets = $5,100,000, inventory = $538,000, notes payable = $189,000;accumulated retained earnings = $4,586,000, long-term debt = $1,250,000.;LO 3 18. Marginal versus Average Tax Rates. (Refer;to Table 2.3.) Corporation Growth has $89,000 in taxable income, and;Corporation Income has $8,900,000 in taxable income.;a. Using;Table 2.3, we can see the marginal tax schedule. For Corporation Growth, the;first $50,000 of income is taxed at 15%, the next $25,000 is taxed at 25%, and;the next $14,000 is taxed at 34%. So, the total taxes for the company will be;b. The marginal tax rate is the;tax rate on the next $1 of earnings. Each firm has a marginal tax rate of 34%;on the next $10,000 of taxable income, despite their different average tax;rates, so both firms will pay an additional $3,400 in taxes.;LO 4 21. Calculating Cash Flows. Titan Football;Manufacturing had the following operating results for 2010: sales = $19,780;cost of goods sold = $13,980, depreciation expense = $2,370, interest expense =;$345, dividends paid = $550. At the beginning of the year, net fixed assets were;$13,800, current assets were $2,940, and current liabilities were $2,070. At;the end of the year, net fixed assets were $16,340, current assets were $3,280;and current liabilities were $2,160. The tax rate for 2010 was 35 percent.;(b) Operating;cash flow;(c) Cash flow from assets;(d);Cash flow to creditors $ 2,070 incase no new debt was issued. Cash;flow to stock holders was $550.

 

Paper#45415 | Written in 18-Jul-2015

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