Firm purchases materials for $200 for cash--entries to reflect this:
Most businesses, for tax purposes, prefer to depreciate assets using ___ because
a.
accelerated depreciation; get the cash flow benefit sooner
b.
Straight line depreciation; better reflects the declining value of assets
c.
Straight-line depreciation; better tax benefit this way
d.
Accelerated depreciation; slower write off of allowable deductions
3. A company reports the following:
Long-term debt
4,000
Retained earnings
1,000
APIC
150
Current portion of long term debt
300
Accounts payable
1,200
Short-term notes payable
400
Common stock
500
Accruals
600
Treasury stock
250
What is stockholder's equity?
4.
Long-term debt
4,000
Retained earnings
1,000
APIC
150
Current portion of long term debt
300
Accounts payable
1,200
Short-term notes payable
400
Common stock
500
Accruals
600
Treasury stock
250
What are total current liabilities?
5.
Tax rate = 35%
2012
2013
2014
Taxable income
2,000
2,500
-1,500
Taxes paid
-700
-875
0
How much of a tax refund will be received in 2012 and 2013?
6. Net income is 1,024. Interest expense totals 171, while EBITDA is 2,318. If taxes are 563, what is depreciation and amortization (DA) ?
7.Beginning equity for a company is 188, and ending equity is 200. The company sold stock in the amount of 128, and net income is 83. Given this information, how much did the company pay in dividends this year?
8.A business purchases depreciable equipment for 191, and sells it a few years later for 166. At the time of the sale, accumulated depreciation totals 106. If the company's tax rate is 39, what is the total after tax cash flow that will result from selling this asset?
Firm purchases materials for $200 for cash--entries to reflect this:
Most businesses, for tax purposes, prefer to depreciate assets using ___ because
| a. | accelerated depreciation; get the cash flow benefit sooner | |
| b. | Straight line depreciation; better reflects the declining value of assets | |
| c. | Straight-line depreciation; better tax benefit this way | |
| d. | Accelerated depreciation; slower write off of allowable deductions |
3. A company reports the following:
| Long-term debt | 4,000 |
| Retained earnings | 1,000 |
| APIC | 150 |
| Current portion of long term debt | 300 |
| Accounts payable | 1,200 |
| Short-term notes payable | 400 |
| Common stock | 500 |
| Accruals | 600 |
| Treasury stock | 250 |
What is stockholder's equity?
4.
| Long-term debt | 4,000 |
| Retained earnings | 1,000 |
| APIC | 150 |
| Current portion of long term debt | 300 |
| Accounts payable | 1,200 |
| Short-term notes payable | 400 |
| Common stock | 500 |
| Accruals | 600 |
| Treasury stock | 250 |
What are total current liabilities?
5.
| Tax rate = 35% | 2012 | 2013 | 2014 |
| Taxable income | 2,000 | 2,500 | -1,500 |
| Taxes paid | -700 | -875 | 0 |
How much of a tax refund will be received in 2012 and 2013?
6. Net income is 1,024. Interest expense totals 171, while EBITDA is 2,318. If taxes are 563, what is depreciation and amortization (DA) ?
7.Beginning equity for a company is 188, and ending equity is 200. The company sold stock in the amount of 128, and net income is 83. Given this information, how much did the company pay in dividends this year?
8.A business purchases depreciable equipment for 191, and sells it a few years later for 166. At the time of the sale, accumulated depreciation totals 106. If the company's tax rate is 39, what is the total after tax cash flow that will result from selling this asset?
Related questions
Please show formulas and calculations and not just results and numbers, and explain rationale for answers.
You have the following information for Small Inc. for the current year (Y0). Assume there are 50M shares outstanding.
| Income Statement (M$) | Y0 | Y1 |
| Sales | 1400 | |
| Cost of Goods Sold | 700 | |
| SG&A | 200 | |
| Depreciation | 100 | |
| Earnings Before Interest & Tax (EBIT) | 400 | |
| Interest Expense | 40 | |
| Earnings Before Tax | 360 | |
| Taxes (40%) | 144 | |
| Net Income | 216 | |
| Dividends | 100 |
| Balance Sheet (M$) | Y0 | Y1 |
| Cash | 100 | |
| Accounts Receivable | 300 | |
| Inventories | 500 | |
| Current Assets | 900 | |
| Gross PPE | 400 | |
| Accumulated Depn | 300 | |
| Net Fixed Assets | 100 | |
| TOTAL ASSETS | 1,000 | |
| Accruals | 25 | |
| Accounts Payable | 150 | |
| Notes Payable | 75 | |
| Current Liabilities | 250 | |
| Long Term Debt | 350 | |
| Common Stock | 100 | |
| Retained Earnings | 300 | |
| Total Liability & Equity | 1,000 |
1. Forecast the income statement and balance sheet for Y1. Assume: Sales and accounts receivable grow by 25%; cost of goods sold, inventory and accounts payable grow 20%; and SG&A grows 10%. Interest expense will fall to 25M. The following accounts will not change (same dollar amount): depreciation expense, dividends, cash, accruals, notes payable, long-term debt, common stock. The firm will need 150M more in gross PPE. Use the cash account to balance the balance sheet.
2. Estimate the stock price for Small Inc. using discounted cash flows. Assume Small Inc. grows at 5% after year 1, the cost of capital is 15% and cash is a non-operating asset.You will need the free cash flow for year 1 and the horizon value as part of the solution.
3. Large Inc. has a forward P-E multiple of 4.5x.Use this to estimate the stock price for Small Inc..
Please show formulas and calculations and not just results and numbers, and explain rationale for answers.
You have the following information for Small Inc. for the current year (Y0). Assume there are 50M shares outstanding.
| Income Statement (M$) | Y0 | Y1 |
| Sales | 1400 | |
| Cost of Goods Sold | 700 | |
| SG&A | 200 | |
| Depreciation | 100 | |
| Earnings Before Interest & Tax (EBIT) | 400 | |
| Interest Expense | 40 | |
| Earnings Before Tax | 360 | |
| Taxes (40%) | 144 | |
| Net Income | 216 | |
| Dividends | 100 |
| Balance Sheet (M$) | Y0 | Y1 |
| Cash | 100 | |
| Accounts Receivable | 300 | |
| Inventories | 500 | |
| Current Assets | 900 | |
| Gross PPE | 400 | |
| Accumulated Depn | 300 | |
| Net Fixed Assets | 100 | |
| TOTAL ASSETS | 1,000 | |
| Accruals | 25 | |
| Accounts Payable | 150 | |
| Notes Payable | 75 | |
| Current Liabilities | 250 | |
| Long Term Debt | 350 | |
| Common Stock | 100 | |
| Retained Earnings | 300 | |
| Total Liability & Equity | 1,000 |
1. Forecast the income statement and balance sheet for Y1. Assume: Sales and accounts receivable grow by 25%; cost of goods sold, inventory and accounts payable grow 20%; and SG&A grows 10%. Interest expense will fall to 25M. The following accounts will not change (same dollar amount): depreciation expense, dividends, cash, accruals, notes payable, long-term debt, common stock. The firm will need 150M more in gross PPE. Use the cash account to balance the balance sheet.
2. Estimate the stock price for Small Inc. using discounted cash flows. Assume Small Inc. grows at 5% after year 1, the cost of capital is 15% and cash is a non-operating asset.You will need the free cash flow for year 1 and the horizon value as part of the solution.
3. Large Inc. has a forward P-E multiple of 4.5x.Use this to estimate the stock price for Small Inc..
