1A. Last year, The Pizza Joint added $6,230 to retained earnings from sales of $104,650. The company had costs of $87,300, dividends of $2,500, and interest paid of $1,620. Given a tax rate of 34 percent, what was the amount of the depreciation expense?

 1B. 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?

 

 2A. For the year, Uptowne Furniture had sales of $818,790, costs of $748,330, and interest paid of $24,450. The depreciation expense was $56,100 and the tax rate was 34 percent. At the beginning of the year, the firm had retained earnings of $172,270 and common stock of $260,000. At the end of the year, retained earnings was $158,713 and common stock was $280,000. Any tax losses can be used. What is the amount of the dividends paid for the year?

 2B. The balance sheet of a firm shows beginning net fixed assets of $348,200 and ending net fixed assets of $371,920. The depreciation expense for the year is $46,080 and the interest expense is $11,460. What is the amount of the net capital spending?

 

 3A. Leslie Printing has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $55,000, 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 paid dividends of $32,500.

What is the amount of the net new equity raised during the year?

 3B. Western Hardwoods has total equity of $318,456, a profit margin of 3.79 percent, an equity multiplier of 1.68, and a total asset turnover of .97.

What is the amount of the firm's sales?

 

4. You are negotiating to make a 7-year loan of $25,000 to Breck Inc. To repay you, Breck will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. Breck is essentially riskless, so you are confident the payments will be made. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan.

 What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X?

 

 5. Ten years ago Jim took a mortgage loan of $200,000 to be repaid in 20 equal annual installments of $30,197.34. The bank has told him that they would accept $145,000 today as payment in full for the remainder of the loan.

 a. What is the balance on this loan?

b. If we assume that Jim has the money, what interest rate must he earn on alternative investments in order not to accept the bank offer?

 

6. Sam wants to save money to meet two objectives. First, he would like to buy a fishing boat 5 years from today at an estimated cost of $15,000. Second, he would like to retire 20 years from now and have a retirement income of $50,000 per year for at least 20 years. Sam can afford to save only $10,000 per year for the first 10 years. He expects to earn 8% per year on average from his savings over the next 40 years.

 What must his minimum yearly savings be for the second 10 years to meet his objectives?

Answer rating: 100% (QA)

1A To find the amount of depreciation expense we need to calculate the net income first and then use the information provided The formula for net income is Net Income Sales Costs Interest Paid Dividen... View the full answer