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Finance Problems Solution Paper with Workings

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Question;Question;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 free cash flow;for the year?;Question 2;1. 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;3. 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.;Question 4;1. An;investor recently purchased a corporate bond that yields 9.3%. The investor is;in the 31% 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.;Question 5;1. ABC;Inc. recently reported net income of $3,022 and depreciation of $522. What is;the net cash flow?;Question 6;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 9;1. ABC;corporation has operating income of $29,706. The company's depreciation expense;is $8,422. The company is all equity-financed and it faces a tax rate of 36%.;What is the company's net cash flow?;Question 11;1. ABC;Corporation had $80,019 of taxable income. Compute the tax liability.;Question 16;1. ABC;company had a taxable income of $203,601 from operations after all operating;costs but before interest charges of $55,191, dividends received of $75,093;dividends paid of $5,000, and income taxes. What is the firm's income tax;liability?;Hint: use the tax table to compute;taxes.;Question 17;1. ABC;company had a taxable income of $588,645 from operations after all operating;costs but before interest charges of $58,760, dividends received of $56,349;dividends paid of $10,000, and income taxes. What is the firm's income tax;liability?;Hint: use the tax table to compute taxes.;Question 18;1. ABC;company had a taxable income of $560,840 from operations after all operating;costs but before interest charges of $56,242, dividends received of $64,389;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.;Question 22;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?;Question 23;1. Corporate;Bonds issued by ABC Corporation currently issued 10.8%. Municipal Bonds of;equal risk currently yield 6.3%. At what tax rate would an investor be;indifferent between these two bonds?;Question 24;1. 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

 

Paper#49402 | Written in 18-Jul-2015

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