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The Paper Moon has an operating cash flow of $187,000 and a cash flow to creditors of $61,400
for the past year. During that time, the firm invested $28,000 in net working capital and incurred
net capital spending of $48,900. What is the amount of the cash flow to stockholders for the last year
 
$48,700
 
187,000 - 28,000 - 48,900) - 61,400 = 48,700
   
Kaylor Equipment Rental paid $75 in dividends and $511 in interest expense.
The addition to retained earnings is $418 and net new equity is $500.
 
The tax rate is 35 percent.
 
Sales are $15,900 and depreciation is $680.
What are the earnings before interest and taxes?
 
$1269.46
 
75 + 418 = 493
493 / (1 - .35) = 758.46
758.46 + 511 = 1,269.46
   
Winston Industries had sales of $843,800 and costs of $609,900.
The firm paid $38,200 in interest and $18,000 in dividends.
It also increased retained earnings by $62,138 for the year.
The depreciation was $76,400.
What is the average tax rate?
 
32.83%
 
843,800 - 609,900 - 76,400 - 38,200 = 119,300
18,000 + 62,138 = 80,138
119,300 - 80,138 = 39,162
39,162 / 119,300 = .3283, or 32.83 percent
   
A firm has net working capital of $560.
Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910.
 
What is the amount of the total liabilities?
 
$6,890.00
 
Current assets = $7,390 - 3,910 = $3,480
Current liabilities = $3,480 - 560 = $2,920
Total liabilities = $2,920 + 3,970 = $6,890
 
Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities
of $34,700, and long-term debt of $23,000.
What is the value of the owners' equity
 
$71,600
 
(29800 + 64800) – 23000 = 71600
   
Keyser Materials paid $7,500 in dividends and $28,311 in interest over the past year while net
working capital increased from $13,506 to $18,219. The company purchased $42,000 in net new
fixed assets and had depreciation expenses of $16,805. During the year, the firm issued $25,000 in
net new equity and paid off $11,000 in long-term debt. What is the amount of the cash flow from assets
 
$21,811
 
28311 + 1100 + (7500 - 2500) = 21811
   
A firm has common stock of $6,200,
paid-in surplus of $9,100,
total liabilities of $8,400,
current assets of $5,900,
and fixed assets of $21,200.
 
What is the amount of the shareholders' equity?
 
$18,700.00
 
Shareholders' equity = $5,900 + 21,200 - 8,400 = $18,700
(Note: The amount of retained earnings is not provided, so you must use total assets minus total liabilities.)
   
Six months ago, Altman Metal Works repurchased $20,000 of its common stock.
The company pays regular quarterly dividends totaling $7,500 per quarter.
What is the amount of the cash flow to stockholders for the past year if no additional shares were issued?
 
50,000
 
20,000 + (4 x 7500) = 50,000
   
Bonner Automotive has shareholders' equity of $218,700.
The firm owes a total of $141,000 of which 40 percent is payable within the next year.
The firm has net fixed assets of $209,800.
 
What is the amount of the net working capital?
 
$93,500.00
 
.40 × $141,000 = 56,400
218,700 + 141,000 = 359,700
359,700 - 209,800 = 149,900
149,900 - 56,400 = 93,500
   
Home Repairs, Inc. incurred depreciation expenses of $21,900 last year. The sales were $811,400
and the addition to retained earnings was $14,680. The firm paid interest of $9,700 and dividends
of $1,100. The tax rate was 34 percent. What was the amount of the costs incurred by the firm
 
755,890.91
 
14680 + 1100)/(1 - 0.34) + 9700 = 33609.09
811400 - 21900 - 33609.09 = 755890.91
   
The Lakeside Inn had operating cash flow of $48,450.
Depreciation was $6,700 and interest paid was $2,480.
A net total of $2,620 was paid on long-term debt.
The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.
 
What is the amount of the cashflow to stockholders?
 
$20,680
 
Cash flow from assets = $48,450 - (-$1,330) - 24,000 = $25,780
Cash flow to creditors = $2,480 - (-$2,620) = $5,100
Cash flow to stockholders = $25,780 - 5,100 = $20,680
   
Blasco Printing has net income of $26,310 for the year. At the beginning of the year, the firm had
common stock of $35,000, paid-in surplus of $11,200, and retained earnings of $48,420.
At the end of the year, the firm had total equity of $142,430. The firm does not pay dividends.
What is the amount of the net new equity raised during the year?
 
21,500
 
142430 - 35000 - 11200 - 48420 - 26310 = 21500
   
During the year, RIT Corp. had sales of $565,600.
Costs of goods sold, administrative and selling expenses, and depreciation expenses were
$476,000, $58,800, and $42,800, respectively.
In addition, the company had an interest expense of $112,000 and a tax rate of 32 percent.
What is the operating cash flow for the year?
(Ignore any tax loss carry-back or carry-forward provisions).
 
$30800
 
Earnings before interest and taxes = Net income =
$565,600 - 476,000 - 58,800 - 42,800 = -$12,000
Operating cash flow = -$12,000 + 42,800 - 0 = $30,800
   
Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year.
This year, the current assets are $82,600 and the current liabilities are $85,100.
The depreciation expense for the past year is $9,600 and the interest paid is $8,700.
What is the amount of the change in net working capital
 
1,400
 
82600 - 85100) - (627200 - 71100) = 1400
   
Suppose you are given the following information for Bayside Bakery:
 
Sales = $30,000
Costs = $15,000
 
Addition to retained earnings = $4,221
Dividends paid = $469
Interest expense = $1,300
Tax rate = 30 percent.
 
What is the amount of the depreciation expense?
 
$7,000
 
Net income = $469 + 4,221 = $4,690
Earnings before taxes = $4,690 / (1 - .30) = $6,700
Earnings before interest and taxes = $6,700 + 1,300 = $8,000
Depreciation = $30,000 - 15,000 - 8,000 = $7,000
   
What is the taxable income given:
 
COGS                     $6409
Interest                 $315
Dividends            $420
Depreciation      $811
Change in RE      $296
Tax Rate               34%
 
$1084.85
 
Net income = $296 + 420 = $716
Taxable income = $716 / (1 - .34) = $1,084.85
   
What is the operating cash flow given:
 
COGS                                     $92,511
Interest                                 $3,200
Depreciation                      $18,709
Change in RE                      $14,308
Tax rate                                35%
 
$40,825.00
 
Net income = $14,308 + 3,200 = $17,508
Taxable income = $17,508 / (1 - .35) = $26,935.38
Earnings before interest and taxes = $26,935.38 + 4,608 = $31,543.38
Operating cash flow = $31,543.38 + 18,709 - .35($26,935.38) = $40,825.00
   
The Overside Market is obligated to pay its creditors $11,800 today.
The firm's assets have a current market value of $10,900.
What is the current market value of the shareholders' equity?
 
$0
 
Shareholders' equity = Max [($10,900 - 11,800),0].
Since the market value of equity cannot be negative, the answer is zero.
   
Lifeline, Inc., has
sales of $590,000
costs of $268,000
depreciation expense of $68,500,
interest expense of $35,500,
and a tax rate of 40 percent.

Required:
 
What is the net income for this firm?
 
$130,800
 
Sales $590,000 - Costs 268,000 - Depreciation 68,500 =
EBIT $253,500 - Interest 35,500 = Taxable income $218,000
Taxable income $218,000 · 0.4 = Net income
$130,800
   
Pier Imports has cash of $41,100 and accounts receivable of $54,200, all of which is expected to be collected.
The inventory cost $82,300 and can be sold today for $116,500.
The fixed assets were purchased at a total cost of $234,500 of which $118,900 has been depreciated.
Fixed assets can be sold today for $138,000. What is the total book value of the firm's assets?
 
293,200

Book value = $41,100 + 54,200 + 82,300 + 234,500 -118,900 = $293,200
   
Lester's Fried Chick'n purchased its building 11 years ago at a cost of $189,000.
The building is currently valued at $209,000. The firm has other fixed assets that cost $56,000 and
are currently valued at $32,000.
To date, the firm has recorded a total of $49,000 in depreciation on the various assets it currently owns.
Current liabilities are $36,600 and net working capital is $18,400. What is the total book value of
the firm's assets?
 
251,000

Book value = $189,000 + 56,000 -49,000 + 18,400 + 36,600 = $251,000
   
Bear Tracks, Inc., has current assets of $2,240, net fixed assets of $10,000, current liabilities of $1,385, and long-term debt of $4,050.


a. What is the value of the shareholders' equity account for this firm?
b. How much is the company's net working capital?
 
6,805
855
   
Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400.
The tax rate is 35 percent. What is net income?
 
-1,235

($179,600 -138,200 -28,400 -14,900) (1 -.35) = -$1,235
   
AV Sales has net revenue of $513,000 and costs of $406,800.
The depreciation expense is $43,800 interest paid is $11,200, and dividends for the year are$4,500.
The tax rate is 33 percent. What is the addition to retained earnings?
 
29,804

[($513,000 -406,800-43,800 -11,200)(1 -.33)] - $4,500 = 29,804
   
Holly Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interest paid of $12,400.
The tax rate is 28 percent. How much net income did the firm earn for the period?
 
$9,324

Net income = ($509,600 -448,150 -36,100 -12,400) (1 -.28) = $9,324
   
Pharrell, Inc., has sales of $600,000, costs of $258,000, depreciation expense of $63,500, interest
expense of $30,500, and a tax rate of 40 percent.
The firm paid out $43,500 in cash dividends and has 55,000 shares of common stock outstanding.

a. earnings per share:
b. dividends per share
 
2.71
0.79
   
Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year.
This year, the current assets are $82,600 and the current liabilities are $85,100.
The depreciation expense for the past year is $9,600 and the interest paid is $8,700.
What is the amount of the change in net working capital?
 
1,400

Change in net working capital = ($82,600 -85,100) - ($67,200 -71,100) = $1,400
   
The December 31, 2015, balance sheet of Maria's Tennis Shop, Inc., showed current assets of $1,195
and current liabilities of $960.
The December 31, 2016, balance sheet showed current assets of $1,410 and current liabilities of $1,085.
What was the company's 2016 change in net working capital, or NWC?
 
90
   
The Expresso Roast Corporation (ERC) is considering expanding its product lines.
The company's founder is obscenely wealthy and will operate
these lines for only one year before retiring and will therefore use only a one-year planning horizon.
The first candidate for acquisition is Quick-Roast Coffee, which has a cost today of $75,000 and is
expected to produce cash benefits of $80,000 in one year.
A major government study may come out later on this year declaring coffee drinking a major
health risk, so this is a risky investment
and ERC's CFO has recommended a risk premium of 15%.
All future cash benefits will occur at the end of the year.
The rate of return on US T-Bills is 4%.
What is the NPV of this investment? Do not enter "$" or comma: just enter the number and sign of your answer.
 
-7773.11

Quick-Roast's discount rate is the risk-free rate + the risk premium

4% + 15% = 19% = $80,000/(1.19) - $75,000 = $67,227 - $75,000 =  -$7,773
   
Eight years from now, you will be inheriting $100,000.
What is this inheritance worth to you today if you can earn 7.25 percent interest, compounded annually?
 
$57,124.39

$100,000 / (1 + .0725)8 = $57,124.39
   
JK Industries just signed a sales contract with a new customer.
JK will receive annual payments in the amount of $62,000, $108,000, $135,000, and $150,000 at the
end of Years 1 to 4, respectively.
What is this contract worth at the end of Year 4 if the firm earns 4.3 percent on its savings?
 
$478,639.54

FV = ($62,000 ×1.0433) + ($108,000 ×1.0432) + ($135,000 ×1.0431) + $150,000 = $478,639.54
   
How much money does Suzie need to have in her retirement savings account today if she wishes to
withdraw $42,000 a year for 25 years?
She expects to earn an average rate of return of 9.75 percent.
 
388,683.83

PV = $42,000 × {1 - [1 / (1 + .0975)²⁵]} / .0975 = $388,683.83
 
   
Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400.
What is the amount of net working capital?
 
$300
   
Bonner Automotive has shareholders' equity of $218,700.
The firm owes a total of $141,000 of which 40 percent is payable within the next year.
The firm has net fixed assets of $209,800. What is the amount of the net working capital?
 
$93,500
   
Four years ago, Ship Express purchased a mailing machine at a cost of $218,000.
This equipment is currently valued at $97,400 on today's balance sheet but could actually be sold for $92,900.
This is the only fixed asset the firm owns. Net working capital is $41,300 and long-term debt is $102,800.
What is the book value of shareholders' equity?
 
$35,900
   
Drew owns The What-Not Shop, which he is trying to sell so that he can retire and travel.
The shop owns the building in which it is located. This building was built at a cost of $647,000
and is currently appraised at $819,000.
The counters and fixtures originally cost $148,000 and are currently valued at $65,000.
The inventory is valued on the balance sheet at $319,000 and has a retail market value equal to 1.1 times its cost.
Jake expects the store to collect 96 percent of the $21,700 in accounts receivable.
The firm has $26,800 in cash and has total debt of $414,700. What is the market value of this firm?
 
$867,832
   
Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.
Common stock increased by $1,200 and retained earnings decreased by $310.
What is the net income for the year?
 
$990
   
Andre's Bakery has sales of $613,000 with costs of $479,000. Interest expense is $26,000 and depreciation is $42,000.
The tax rate is 25 percent. What is the net income?
 
$49,500
   
Kaylor Equipment Rental paid $75 in dividends and $511 in interest expense.
The addition to retained earnings is $418 and net new equity is $500. The tax rate is 35 percent.
Sales are $15,900 and depreciation is $680.
What are the earnings before interest and taxes?
 
$1,269.46
   
Winston Industries had sales of $843,800 and costs of $609,900.
The firm paid $38,200 in interest and $18,000 in dividends. It also increased retained earnings
by $62,138 for the year.
The depreciation was $76,400. What is the average tax rate?
 
32.83%