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##### Given the following marginal tax schedule, what would be the tax on \$70,000 of taxable income....

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Question;1. Given the following;marginal tax schedule, what would be the tax on \$70,000 of taxable income?;\$0;to 50,00015%;50,001;to 75,00025%;75,001;to 100,00034%;2. Use the data in the;following table to compute the percentage change in EBIT that would occur if;sales were to increase by10%.;Sales\$500,000;Less;Variable cost 200,000;Less;Fixed cost 250,000;EBIT 50,000;Less;interest 20,000;Profit;before tax 30,000;Less tax 12,000;Net Profit 18,000;3.CCA;ltd. has sales of \$6,000 and the following balance sheet.;Assets;Current;Forecasted;Liab.;Equity;Current;Forecasted;Cash;\$100;Accounts;payable;\$900;Accounts;rec.;600;Long;term debt;1050;Inventory;1200;Equity;1950;Plant;2000;Total;3900;Total;3900;Assume;that all current assets and current liabilities change with sales and that;sales are expected to grow to \$8,000.;a.Use the percent of sales forecasting method to;forecast these values and enter them in the forecast column of the balance;sheet above.;b.The net profit margin (what the firm earns on;sales) is 8%.Forecast;the new level of equity and enter it in the forecast column of the balance;sheet above.;c.Complete the balance sheet.Does the firm require additional external;financing hint EFR calculation)?If so, how much?;4.;If you are evaluating mutually exclusive investments, it is possible that the;net present value and the internal rate of return methods may not agree as to;which of the investments is the most desirable.Explain fully two;reasons why this might occur.(5 points);5. Calculate;the following values for a project that requires an initial investment of;\$26,192 and has equal annual cash inflows of \$8,000 each year for the next five;years.Assume a cost of capital of 12%.You must show your work for full credit.;a.Payback period;b.Net present value;c. Internal rate of return;6. Estimating weighted;cost of capital;Assume the following;percentage capital structure is considered optimal for this firm.;Debt.30;Preferred;stock.10;Common;equity.60;The;firm has estimated the after tax cost of each source of funds. Debt costs.06;preferred stock.10, retained earnings.18 and common stock.22.The firm is operating under conditions of;capital rationing and therefore will not sell new stock to the public.What is the weighted cost of capital for this;firm?;7. Given the following;information;interest;rate 8%;tax;rate 30%;dividend \$1;price of the common;stock \$50;growth rate of;dividends 7%;debt;ratio 40%;a. Determine the firm's cost of;capital.;b. If the debt ratio rises to;50 percent and the cost of funds remains the same, what is the new cost of;capital?;c. If the debt ratio rises to 60 percent, the interest rate;rises to 9 percent, and the price of the stock falls to \$30, what is the cost;of capital?;d. Why is this cost different?

Paper#47479 | Written in 18-Jul-2015

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