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Question(s) / Instruction(s):

1.  Lower capital gains tax rates tend to encourage investment in productive assets.

a. True

b. False

 

2. Ravings Incorporated recently reported net income of $5.4 million. Its operating income (EBIT) was $15 million, and its tax rate was 40 percent. What was the company’s interest expense?

a. 9.6 million

b. $3.6 million

c. $18 million

d. $6 million

e. $24 million

 

3. Again Incorporated’s net cash flow is $6.2 million. The company’s depreciation expense is $1.2 million.  What is the company’s net income if it has no amortization expense?

a. $5 million

b. $7.4 million

c. $9.2 million

d. $10.2 million

e. $13.3 million

 

4. Jones Inc. reported interest expense of $45 million and net income of $30 million. Its tax rate was 40 percent.  What was the firm’s net operating profit after taxes (NOPAT)?

a. $50 million

b. $95 million

c. $37.8 million

d. $57 million

e. $120 million

 

5. Valuable Incorporated’s stock currently sells for $45 per share. The firm has 20 million share of common outstanding. The firm’s total debt equals $600 million and its common equity equals $400 million.  What is the firm’s market value added?

a. $200 million

b. $250 million

c. $350 million

d. $300 million

e. $500 million

 

6. In its recent income statement, Smith Software Inc. reported $23 million of net income, and in its year-end balance sheet, Smith reported $401 million of retained earnings.  The previous year, its balance sheet showed $389 million of retained earnings.  What were the total dividends paid to shareholders during the most recent year?  (Answers are in $ millions.)

a. $12.00

b. $11.00

c. $23.00

d. $9.00

e. $30.00

 

7. In its recent income statement, Smith Software Inc. reported paying $10 million in dividends to common shareholders, and in its year-end balance sheet, Smith reported $419 million of retained earnings.  The previous year, its balance sheet showed $404 million of retained earnings.  What was the firm’s net income during the most recent year?  (Answers are in $ millions.)

a. $25.00

b. $15.00

c. $10.00

d. $8.00

e. $32.00

 

8. Cox Corporation recently reported an EBITDA of $58 million and $7 million of net income.  The company has $12 million interest expense and the corporate tax rate is 40.0% percent.  What was the companys depreciation and amortization expense?  (Answers are in $ millions.)

a. $39.00

b. $46.00

c. $51.00

d. $34.33

e. $56.00

 

9. Hayes Corporation has $423 million of common equity on its balance sheet and 9,000,000 shares of common stock outstanding.  The companys Market Value Added (MVA) is $151 million.  What is the companys stock price?  (Answers are in $ millions.)

a. $47.00

b. $63.78

c. $16.78

d. $69.20

e. $14.65

 

10. Brooks Sisters operating income (EBIT) is $194 million.  The companys tax rate is 40.0%, and its operating cash flow is $148.4 million.  The companys interest expense is $39 million.  What is the companys net cash flow?  (Assume that depreciation is the only non-cash item in the firms financial statements.)  (Answers are in $ millions.)

a. $125.00

b. $93.00

c. $32.00

d. $116.40

e. $155.00

 

11. Casey Motors recently reported net income of $19 million.  The firms tax rate was 40.0% and interest expense was $6 million.  The companys after-tax cost of capital is 14.0% and the firms total investor supplied operating capital employed equals $95 million.  What is the companys EVA?  (Answers are in $ millions.)

a. $13.30

b. $19.00

c. $31.67

d. $22.60

e. $9.30

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