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additional investment by existing shareholders.
MC Qu. 61 Long-term financing decisions commonly…
Long-term financing decisions commonly occur in the:
MC Qu. 66 In 2010, U.S. corporate and foreign bonds…
In 2010, U.S. corporate and foreign bonds totaled:
MC Qu. 67 In 2010, U.S. corporate equities totaled:
In 2010, U.S. corporate equities totaled:
MC Qu. 71 Which of the following is least liquid?
Which of the following is least liquid?
MC Qu. 78 Who was responsible for the financial…
Who was responsible for the financial crisis of 2007-2009?
MC Qu. 50 Which of the following statements is true…
Which of the following statements is true for a corporation with $1 million market value of equity, $2 million market value of assets, and 1,000 shares of outstanding stock?
MC Qu. 57 Accrual accounting, which attempts to match…
Accrual accounting, which attempts to match sales revenues and the expenses associated with the production of the goods, is conducted in an attempt to:
MC Qu. 71 Which of the following is more likely to…
Which of the following is more likely to be correct if market value of equity is less than book value of equity?
MC Qu. 78 An increase in depreciation expense will…
An increase in depreciation expense will (other things equal):
MC Qu. 94 For a corporation in the 25% marginal tax…
For a corporation in the 25% marginal tax bracket that incurs $70.00 in labor and materials expense, plus $15.00 in depreciation expense while generating an incremental revenue of $100.00, tax liability will increase by:
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MC Qu. 100 What is the marginal impact on taxes for a…
What is the marginal impact on taxes for a profitable corporation in the 35% marginal tax bracket that incurs an additional dollar of depreciation expense? |
TF Qu. 8 ROE is equal to ROA when the firm has no…
ROE is equal to ROA when the firm has no debt.
MC Qu. 33 Which of the following statements is…
Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT? The firm:
MC Qu. 35 If ROC is less than a firm s cost…
If ROC is less than a firm’s cost of capital, which of the following must be true?
MC Qu. 54 How would you interpret an inventory…
How would you interpret an inventory turnover ratio of 10.7?
MC Qu. 75 An example of liquid assets would be:
An example of liquid assets would be:
MC Qu. 93 Net Corp. has an ROE of…
Net Corp. has an ROE of 30% and would like to see earnings grow at a 18% annual rate. What percentage of earnings can it afford to pay out as dividends?
Problem 3-14 Market versus Book Values (LO2)
| The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $3,300,000 in setting up a production plant. He believes that he could sell his patent for $75 million. |
| a. |
What are the book value and market value of the firm? (Enter your answers in dollars not in millions.) |
b.
If there are 3 million shares of stock in the new corporation, what would be the price per share and the book value per share? (Round your answers to 2 decimal places.)
Problem 3-18 Profits versus Cash Flow (LO3)
| During the last year of operations, accounts receivable increased by $10,900, accounts payable increased by $5,900, and inventories decreased by $2,900. What is the total impact of these changes on the difference between profits and cash flow? (Input the amount as a positive value.)
Problems 3-27 Earnings per Share (LO1)
| The table below contains data on Fincorp, Inc., the balance sheet items correspond to values at year-end of 2010 and 2011, while the income statement items correspond to revenues or expenses during the year ending in either 2010 or 2011. All values are in thousands of dollars. |
|
2010 |
2011 |
| Revenue |
$4,200 |
$4,300 |
| Cost of goods sold |
1,700 |
1,800 |
| Depreciation |
520 |
540 |
| Inventories |
310 |
370 |
| Administrative expenses |
520 |
570 |
| Interest expense |
170 |
170 |
| Federal and state taxes* |
420 |
440 |
| Accounts payable |
310 |
370 |
| Accounts receivable |
412 |
470 |
| Net fixed assets† |
5,200 |
6,020 |
| Long-term debt |
2,200 |
2,600 |
| Notes payable |
1,010 |
620 |
| Dividends paid |
450 |
450 |
| Cash and marketable securities |
820 |
320 |
|
| * Taxes are paid in their entirety in the year that the tax obligation is incurred. |
| † Net fixed assets are fixed assets net of accumulated depreciation since the asset was installed. |
Suppose that Fincorp has 500,000 shares outstanding. What were earnings per share? (Round your answers to 2 decimal places.)
Problem 4-3 EVA (LO2)
| Here are simplified financial statements of Phone Corporation from a recent year: |
INCOME STATEMENT
(Figures in millions of dollars) |
| Net sales |
12,700 |
| Cost of goods sold |
3,810 |
| Other expenses |
4,112 |
| Depreciation |
2,368 |
|
|
| Earnings before interest and taxes (EBIT) |
2,410 |
| Interest expense |
660 |
|
|
| Income before tax |
1,750 |
| Taxes (at 30%) |
525 |
|
|
| Net income |
1,225 |
| Dividends |
826 |
|
|
|
BALANCE SHEET
(Figures in millions of dollars) |
|
End of Year |
Start of Year |
| Assets |
|
|
| Cash and marketable securities |
84 |
153 |
| Receivables |
2,132 |
2,390 |
| Inventories |
162 |
213 |
| Other current assets |
842 |
907 |
|
|
|
| Total current assets |
3,220 |
3,663 |
| Net property, plant, and equipment |
19,923 |
19,865 |
| Other long-term assets |
4,166 |
3,720 |
|
|
|
| Total assets |
27,309 |
27,248 |
|
|
|
| Liabilities and shareholders’ equity |
|
|
| Payables |
2,514 |
2,990 |
| Short-term debt |
1,394 |
1,548 |
| Other current liabilities |
786 |
762 |
|
|
|
| Total current liabilities |
4,694 |
5,300 |
| Long-term debt and leases |
8,263 |
7,728 |
| Other long-term liabilities |
6,128 |
6,099 |
| Shareholders’ equity |
8,224 |
8,121 |
|
|
|
| Total liabilities and shareholders’ equity |
27,309 |
27,248 |
|
|
|
|
| Phone Corp.’s cost of capital was 7.8%. |
What was Phone Corp.’s economic value added?(Enter your answer in millions rounded to 2 decimal places.)
Problem 4-6 Sustainable Growth (LO5)
| Consider the following information: |
|
Davis
Chili’s |
Bagwell Company |
| Return on equity (ROE) |
15.70% |
10.60% |
| Plowback ratio |
0.50 |
0.85 |
| Sustainable growth |
7.20% |
8.40% |
|
| a. |
What would the sustainable growth rate be if Davis Chili’s plowback ratio rose to the same value as Bagwell Company? (Round your answer to 2 decimal places.)
b.
What would the sustainable growth rate be if Davis Chili’s return on equity were only 14.7%? (Round your answer to 2 decimal places.)
Problem 4-23 Times Interest Earned (LO3)
In the past year, TVG had revenues of $2.96 million, cost of goods sold of $2.46 million, and depreciation expense of $95,300. The firm has a single issue of debt outstanding with book value of $1.14 million on which it pays an interest rate of 10%. What is the firm’s times interest earned ratio? (Round your answer to 2 decimal places.) |
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