Finance Assignment Paper

Question 2

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

Question 3

1.      ABC's EBIT is $12 million. The depreciation expense is $0.5 million and interest expense is $0.5 million. The corporate tax rate is 45%. 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 7%. Assume that the only non-cash item is depreciation. The total net operating capital last year was $6 million.

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

Question 4

1.      During 2007, ABC had sales of $76,838. Cost of goods sold, administrative expenses and selling expenses, and depreciation expenses were $39,783, $4,667, and $9,389, respectively. In addition, the company had an interest expense of $3,228, and a tax rate of 39%. The company paid$8,442 as dividends. If the retained earnings is 2006 were $56,786, what are the retained earnings in 2007?

Question 5

1.      ABC company had a taxable income of $596,721 from operations after all operating costs but before interest charges of $57,206, dividends received of $45,286, 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 6

1.      ABC company had a taxable income of $585,548 from operations after all operating costs but before interest charges of $58,540, dividends received of $46,821, 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 7

1.      In its most recent financial statements, ABC Inc. reported $49 of net income and $780 of retained earnings. The previous retained earnings were $842. How much in dividends was paid to shareholders during the year?

Question 11

1.      Culligan, Inc., has current assets of $28,817, net fixed assets of $145,981, current liabilities of $17,345, and long-term debt of $55,546. What is the shareholders' equity?

Question 14

1.      ABC recently reported $47,529 of sales, $12,670of operating costs other than depreciation, and $5,723 of depreciation.  The company had no amortization charges and no non-operating income.  It had $8,000 of bonds outstanding that carry a 11% interest rate. How much was the firm's taxable income, or earnings before taxes (EBT)?

Hint: Interest rate = Bonds outstanding * interest rate

Question 17

1.      ABC company had a taxable income of $197,222 from operations after all operating costs but before interest charges of $58,375, dividends received of $63,280, 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 18

1.      ABC Inc. recently reported net income of $3,822 and depreciation of $587. What is the net cash flow?

Question 19

1.      An investor recently purchased a corporate bond that yields 14.4%. The investor is in the 30% combined federal and state tax bracket. What is the bond's after-tax yield?

Question 20

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 22

1.      ABC Corporation had $85,839 of taxable income. Compute the tax liability.

Question 23

1.      Corporate Bonds issued by ABC Corporation currently issued 10.5%. Municipal Bonds of equal risk currently yield 7.3%. At what tax rate would an investor be indifferent between these two bonds?

Question 24

1.      ABC's EBIT is $5 million. The depreciation expense is $0.5 million and interest expense is $0.5 million. The corporate tax rate is 30%. The company has 8 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 6%. Assume that the only non-cash item is depreciation. The total net operating capital last year was $4 million.

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