most recent financial statements, ABC Inc. reported $35 of net income and $790 of retained

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 economic value added (EVA)?

Question 2

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?

Question 3

During 2007, ABC had sales of $67,381. Cost of goods sold, administrative expenses and selling expenses, and depreciation expenses were $27,193, $4,346, and $9,541, respectively. In addition, the company had an interest expense of $4,439, and a tax rate of 33%. The company paid$7,528 as dividends. If the retained earnings is 2006 were $51,649, what are the retained earnings in 2007?

Question 4

Corporate Bonds issued by ABC Corporation currently issued 12.1%. Municipal Bonds of equal risk currently yield 6.8%. At what tax rate would an investor be indifferent between these two bonds?

Question 5

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 6

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 7

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

Question 8

In its most recent financial statements, ABC Inc. reported $35 of net income and $790 of retained earnings. The previous retained earnings were $840. How much in dividends was paid to shareholders during the year?

Question 9

ABC company had a taxable income of $530,983 from operations after all operating costs but before interest charges of $58,072, dividends received of $41,381, dividends paid of $10,000, and income taxes. What is the firm's income tax liability?

Question 10

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

Question 11

The dividend payments are tax-deductible.

True

False