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Intermediate

(continued )

Challenge

(Questions 23-26)

PART ONE Overview of Corporate Finance a. What is owners' equity for 2001 and 2002?

b. What is the change in net working capital for 2002?

c. In 2002, Parrothead Enterprises purchased $1,500 in new fixed assets. How much in fixed assets did Parrothead Enterprises sell? What is the cash flow from assets for the year? (The tax rate is 35 percent.)

d. During 2002, Parrothead Enterprises raised $300 in new long-term debt. How much long-term debt must Parrothead Enterprises have paid off during the year? What is the cash flow to creditors?

Net Fixed Assets and Depreciation On the balance sheet, the net fixed assets (NFA) account is equal to the gross fixed assets (FA) account, which records the acquisition cost of fixed assets, minus the accumulated depreciation (AD) account, which records the total depreciation taken by the firm against its fixed assets. Using the fact that NFA = FA - AD, show that the expression given in

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