FRL3000: Ch 2 HW

RTF Oil has total sales of $911,400 and costs of $787,300. Depreciation is $52,600 and the tax rate is 21 percent. The firm is all-equity financed. What is the operating cash flow?

($911,400 - $787,300) x 0.79 + ($52,600 x 0.21) =$109,085 100% - 21% = 79%

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed $850,000 in the common stock account and $6.05 million in the additional paid-in surplus account. The 2018 balance sheet showed $955,000 and $7.8 million in the same two accounts, respectively. If the company paid out $520,000 in cash dividends during 2018, what was the cash flow to stockholders for the year?

=$520000 - ($955,000 - $850,000) - ($7,800,000 - $6,050,000) = $520,000 - 105000 - 1,750,000 = $-1335000

Wims, Inc., has current assets of $4,800, net fixed assets of $22,500, current liabilities of $4,300, and long-term debt of $6,500. A. What is the value of the shareholders' equity account for this firm? B. How much is net working capital?

A. $16500 B. 500 To find owner's equity, we must construct a balance sheet as follows: Balance Sheet CA$4,800 CL$4,300 NFA22,500 LTD6,500 OE ?? TA $27,300 TL & OE $27,300 We know that total liabilities and owner's equity (TL & OE) must equal total assets of $27,300. We also know that TL & OE is equal to current liabilities plus long-term debt plus owner's equity, so owner's equity is: a. OE = $27,300 − 6,500 − 4,300 OE = $16,500 b. NWC = CA − CL NWC = $4,800 − 4,300 NWC = $500

Griffin's Goat Farm, Inc., has sales of $709,000, costs of $355,000, depreciation expense of $41,000, interest expense of $19,000, and a tax rate of 23 percent. The firm paid out $118,000 in cash dividends, and has 25,000 shares of common stock outstanding. A. What is the earnings per share, or EPS, figure? B. What is the dividends per share figure?

A. 9.06 B. 4.72 The income statement for the company is: Income Statement Sales$709,000 Costs 355,000 Depreciation 41,000 EBIT$313,000 Interest 19,000 EBT$294,000 Taxes (23%) 67,620 Net income $226,380 a. EPS = Net income/Shares EPS = $226,380/25,000 EPS = $9.06 per share b. DPS = Dividends/Shares DPS = $118,000/25,000 DPS = $4.72 per share

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed $2.5 million in long-term debt, $780,000 in the common stock account, and $6.1 million in the additional paid-in surplus account. The 2018 balance sheet showed $3.75 million, $975,000, and $8.35 million in the same three accounts, respectively. The 2018 income statement showed an interest expense of $230,000. The company paid out $620,000 in cash dividends during 2018. If the firm's net capital spending for 2018 was $840,000, and the firm reduced its net working capital investment by $125,000, what was the firm's 2018 operating cash flow, or OCF?

Cash Flow to stock holder: Dividend: $620,000 2017 common stock : $780,000 2017 paid in surplus : $6,100,000 2018 common stock: $975,000 2018 paid in surplus: $8,350,000 Dividend + 2017 common stock + 2017 paid surplus - 2018 common stock - 2018 paid surplus = -1,825,000 Cash Flow to creditors: (2017 borrowing - 2018 borrowing) + Interest = ($2,500,000 - $3,750,000) + $230,000 ($-1,250,000) + $230,000 = $-1,020,000 Reduced working capital: $125,000 Net capital spending: $840,000 Cash flow to stock holder + Cash flow to creditors - reduced working capital + net capital spending = operating cash flow = -1,825,000 + (-1,020,000) - 125,000 + 840,000 = $-2,130,000 <—— answer

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $3 million, and the 2018 balance sheet showed long-term debt of $4.2 million. The 2018 income statement showed an interest expense of $220,000. What was the firm's cash flow to creditors during 2018?

Cash flow to creditors = interest - new long term debt = $220,000 - ($4,200,000 - $3,000,000) = $-980000 Cash flow to creditors = Interest paid - Net new borrowingCash flow to creditors = Interest paid - (LTDend - LTDbeg)Cash flow to creditors = $220,000 - ($4,200,000 - 3,000,000)Cash flow to creditors = $-980,000

Jensen Enterprises paid $700 in dividends and $320 in interest this past year. Common stock remained constant at $6,800 and retained earnings decreased by $180. What is the net income for the year?

Dividends paid by the firm ($700) - Change in retained earnings ($180) = $520 Net income = $700 − 180 Net income = $520

Griffin's Goat Farm, Inc., has sales of $594,000, costs of $375,000, depreciation expense of $55,000, interest expense of $25,000, and a tax rate of 23 percent. What is the net income for this firm?

Net Income = [Sales - Costs - Depreciation - Interest](1 - tax rate) = [$594,000 - $375,000 - $55,000 - $25,000](1-0.23) = $107,030 The income statement for the company is: Income Statement Sales$594,000 Costs375,000 Depreciation 55,000 EBIT$164,000 Interest 25,000 EBT$139,000 Taxes (23%) 31,970 Net income $107,030

Logano Driving School's 2017 balance sheet showed net fixed assets of $4.4 million, and the 2018 balance sheet showed net fixed assets of $7.1 million. The company's 2018 income statement showed a depreciation expense of $785,000. What was net capital spending for 2018?

Net capital spending = Ending value of Net Fixed Asset - Beginning value of Net Fixed Asset + Depreciation expense of current year Ending value of Net Fixed Asset = $7,100,000 Beginning value of Net Fixed Asset = $4,400,000 Depreciation of current year = $785,000 Net capital spending =7100000-4400000 + 785000 =$3,485,000 Net capital spending is $3,485,000

For the past year, Galaxy Interiors had depreciation of $2,419, beginning total assets of $23,616, and ending total assets of $21,878. Current assets decreased by $1,356. What was the amount of net capital spending for the year?

Net capital spending = change in total assets during the year - change in current assets + depreciation Net capital spending = (ending total assets - beginning total assets) - change in current assets + depreciation Net capital spending = (21878 - 23616) - (-1356) + 2419 = 2037 Net capital spending = $21,878 − 23,616 + 1,356 + 2,419 Net capital spending = $2,037

Which one of the following statements concerning net working capital is correct?

Net working capital may be a negative value.

Which one of the following statements concerning corporate income taxes is correct for 2018?

The federal income tax on corporations is a flat-rate tax with the same rate applying to all levels of taxable income.

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?

Total Assets 7,390.00 FixedAssets 3,910.00 Current Assets(Total Assets- Fixed Assets) 3,480.00 Working Capital 560.00 Current Liabilities(Current Assets-Working cap) 2,920.00 Long term debt 3,970.00 Total Liab (CL+Long term debt) 6,890.00 Current assets = $7,390 − 3,910Current assets = $3,480Current liabilities = $3,480 − 560Current liabilities = $2,920Total liabilities = $2,920 + 3,970Total liabilities = $6,890

The 2017 balance sheet of Dream, Inc., showed current assets of $1,450 and current liabilities of $940. The 2018 balance sheet showed current assets of $1,680 and current liabilities of $1,080. What was the company's 2018 change in net working capital, or NWC?

Working Capital =Current Assets -Current Liabilities Change in Working Capital = 2018 year - 2017 year ($1680 - $1080) - ($1450 - $940) = $90 Change in NWC = NWCend - NWCbeg Change in NWC = (CAend - CLend) - (CAbeg - CLbeg) Change in NWC = ($1,680 - 1,080) - ($1,450 - 940) Change in NWC = $600 − 510 = $90

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6.7 million. The machinery can be sold to the Romulans today for $4.3 million. Klingon's current balance sheet shows net fixed assets of $3 million, current liabilities of $2.4 million, and net working capital of $550,000. If all the current assets and current liabilties were liquidated today, the company would receive $1.35 million cash.

a. To find the book value of current assets, we use: NWC = CA - CL. Rearranging to solve for current assets, we get: CA = NWC + CL CA = $550,000 + 2,400,000 CA = $2,950,000 The market value of current assets and fixed assets is given, so: Book value CA. $2,950,000 Book value NFA $3,000,000 Book value assets. $5,950,000 b. Market value CA$1,350,000 Market value NFA $4,300,000 Market value assets $5,650,000