1. Building a Balance Sheet. Romo, lnc„ has current assets of $1,850, net fixed Basic assets of $8,600, current liabilities of $1,600. and long-term debt of $6,100. What is (Questions 1-13) the value of the shareholders' equity account for this firm? How much is net working capital?
2. Building an Income Statement. Fyre, Inc., has sales of $625,000, costs of $260,000, depreciation expense of $79,000, interest expense of $43,000, and a tax rate of 35 percent. What is the net income for this firm?
3. Dividends and Retained Earnings. Suppose the firm in Problem 2 paid out $60,000 in cash dividends. What is the addition to retained earnings?
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'?
5. Market Values and Book Values. Klingon Widgets, inc., purchased new cloaking machinery three years ago for $6 million. The machinery can be sold lo the Romulans today for $5.6 million. Klingon's current balance sheet shows net fixed assets of $4.8 million, current liabilities of $780,000, and net working capital of $100,000. If all the current assets were liquidated today, the company would receive $805,000 million cash. What is the book value of Klingon's assets today? What is the market value?
6. Calculating Taxes. The Fly Leaf Co. had $315,000 in taxable income. Using the rates from Table 2.3 in the chapter, calculate the company's income taxes. /x^
7. Tax Rates. In Problem 6, what is the average tax rate? What is the marginal lax rate?
8. Calculating OCF. Stone Sour, Inc., has sales of $16,550, costs of $5,930. depreciation expense of $1,940. and interest expense of $1,460. If the tax rate is 35 percent, what is the operating cash flow, or OCF?
9. Calculating Net Capital Spending. Rotweiler Obedience School's December 3 1, 2007, balance sheet showed net fixed assets of $1,875 million, and the December 31, 2008, balance sheef showed net fixed assets of $2,12 million. The company's 2008 income statement showed a depreciation expense of $220,000. What was Rotweiler's net capital spending for 2008?
10. Calculating Additions to NWC. The December 31, 2007, balance sheet of Anna's Tennis Shop, Inc., showed current assets of $840 and current liabilities of $320. The December 31, 2008, balance sheet showed current assets of $910 and current liabilities of $335. What was the company's 2008 change in net working capital, or NWC?
11. Cash Flow to Creditors. The December 31. 2007, balance sheet of Butterfly Wings, Inc., showed long-term debt of $1.65 million, and the December 31, 2008, balance sheet showed long-term debt of $1.8 million. The 2008 income statement showed an interest expense of $49,000. What was the firm's cash flow to creditors during 2008?
1! 2. Cash Flow to Stockholders. The December 31, 2007, balance sheet of Butterfly Wings, Inc., showed $150,000 in the common stock account and $2.9 million in the additional paid-in surplus account. The December 31, 2008, balance sheet showed $160,000 and $3.2 million in the same two accounts, respectively. If the company paid out $70,000 in cash dividends during 2008, what was the cash flow to stockholders for the year?
13. Calculating Total Cash Flows. Given the information for Butterfly Wings, Inc.,. in Problems 11 and 12, suppose you also know that the firm's net capita] spending for 2008 was $760,000, and that the firm reduced its net working capital investment by $135,000. What was the firm's 2008 operating cash flow, or QCF?
14. Calculating Total Cash Flows. Greene Co. shows the following information on its 2008 income statement: sales = $138,000; costs = $71,500; other expenses = $4,100; depreciation expense = $10,100; interest expense = $7,900; taxes = $17,760; dividends = $5,400. In addition, you're told that the firm issued $2,500 in new equity during 2008, and redeemed $3,800 in outstanding long-term debt.
a. What is the 2008 operating cash flow?
b. What is the 2008 cash flow to creditors?
c. What is the 2008 cash flow to stockholders?
d. If net fixed assets increased by $17,400 during the year, what was the addition to NWC?
15. Using Income Statements. Given the following information for Papa's Pizza Co., calculate the depreciation expense: sales = $42,000; costs = $28,000; addition to retained earnings = $2,100; dividends paid = $915; interest expense = $1,360; tax rate = 40 percent.
16. Preparing a Balance Sheet. Prepare a balance sheet for Alaskan Orange Corp. as of December 31,2008, based on the following information: cash = $167,000; patents and copyrights = $818,000; accounts payable = $236,000: accounts receivable = $241,000; tangible net fixed assets = $4,700,000; inventory = $498,000; notes payable = $176,000; accumulated retained earnings = $4,230,000; long-term debt = $913,000.
17. Residual Claims. Irrational, Inc., is obligated to pay its creditors $7,500 during the year.
a. What is the value of the shareholders' equity if assets equal $8,700?
b. What if assets equal $6,900?
18. Marginal versus Average Tax Rates. (Refer to Table 2.3.) Corporation Growth has $83,000 in taxable income, and Corporation Income has $8,300,000 in taxable income.
a. What is the lax bill for each firm?
b. Suppose both firms have identified a new project that will increase taxable income by $10,000. How much in additional taxes will each firm pay? Why is this amount the same?
19. Net Income and OCF. During the year, Belyk Paving Co. had sales of $2,700,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $1,690,000, $465,000, and $530,000, respectively. In addition, the company had an interest expense of $210,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.)
a. What is Belyk's net income?
b. What is its operating cash flow?
20. Accounting Values versus Cash Flows. In Problem 19, suppose Belyk Paving Co. paid out $500,000 in cash dividends. Is this possible? If no new investments were made in net fixed assets or net working capital, and if no new stock was issued during the year, what do you know about the firm's long-term debt account?
21. Calculating Cash Flows. Titan Football Manufacturing had the following operating results for 2008: sales = $18,450: cost of goods sold = $13,610: depreciation expense = $2,420; interest expense = $260; dividends paid = $450. At the beginning of the year, net fixed assets were $12,100, current assets were $3,020, and current liabilities were $2,260. At the end of the year, net fixed assets were $12,700, current assets were $4,690, and current liabilities were $2,720. The tax rate for 2008 was 35 percent.
a. What is net income for 20087
b. What is the operating cash flow for 2008?
c. What is the cash flow from assets for 2008? Is this possible? Explain d. If no new debt was issued during the year, what is the cash flow to creditors? What is the cash flow to stockholders? Explain and interpret the positive and negative signs of your answers in (a) through (d).
22. Calculating Cash Flows. Consider the following abbreviated financial statements for Cabo Wabo, Inc.:
CABO WABO, INC. Partial Balance Sheets as of December 31, 2007 and 2008
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