Problem 1 (20 marks) Below you are given the Statement of Financial Position and Statement of Comprehensive Income for ABC Inc. for 2023 and 2024. Please use the ABC Inc.'s Financial Statements to answer the following questions. ABC Inc. Statement of Financial Position as of May 3, 2023 and May 2, 2024 ($ millions) Assets Liabilities and Owner's Equity 2024 2023 2024 2023 Current assets Current liabilities Cash $ 2956 4133 Accounts payable $ 22463 % 21945 Accounts receivable 5074 459.3 Other Current Liabilities 168.1 310.6 Inventary 1,260.3 1,309.2 Total $ 24144 25051 Other Current Assets 2021 375.6 Total 22654 3 25574 All Long Term Liabilities $ 28809 37475 Fixed assets Owner's equity Property and equipment 34484 5 36320 Common stock and Other Fixed Assets 4,559.9 4,849.7 paid-in capital 5 28919 28840 Total 80083 84817 Retained earnings 2086.5 1,902.5 Total 5 49784 47865 Total liabilities and Total assets $0,273.7 11,039.1 owner's equity $10,273.7 $11,039.1 ABC Inc. 2024 Statement of Comprehensive Income ($ millions) Sales and Other Income $239856 Cost of goods sold 17.966.3 Other Expenses 50094 Depreciation and Other Non-cash items 362.2 Eamings before interest and taxes 647.70 Interest / Finance costs 150.7 Taxable income 4970 Taxes 130.3 Net income 3667 What is the operating cash flow for 20247 What is the amount of net capital spending for 20247 What is the change in the net working capital in 20247 What is the cash flow from assets for 2024? What is the cash flow to creditors in 20247 What is the cash flow to stockholders for 20247 Show that the cash flow identity holds for ABC Inc. What is ABC Inc.'s tax rate? Assuming ABC Inc.'s current investing activities pattern continues into the future, what effect might that have on its long-term growth? Problem 2 (10 marks) Pine Haven Inc. has sales of $586,000, cost of $247,000, depreciation expense of $43,000, interest expense of $37,000, and a tax rate of 36 percent. Show your calculations as separate notes at the end. s W e o O O W et e e e e et a) Prepare the statement of comprehensive income for this firm? b) Suppose the firm paid out $73,000 in cash dividends. What is the addition to retained earnings? Problem 3 (15 marks) Red Door Inc has the following information for 2024 and a corporate tax rate of 36%. Sales $7,233 Depreciation $1,038 Cost of Goods Sold $2,487 Other Expenses $591 Interest $485 Cash $3,972 Accounts Receivable $5,021 Short-term notes payable $732 Long-term debt $12,700 Net Fixed Assets $31,805 Accounts Payable $3,984 Inventory $8,927 Dividends $882 a) Prepare a 2024 Statement of Comprehensive Income for Red Door Inc. Please provide also information on the dividend amount and retained earings. b) Prepare a 2024 Statement of Financial Position for Red Door Inc. Problem 4 (20 marks) Discover Challenges Inc. hired a consultant to assess a new market for a new product. After receiving $10,000 fee for the consultation, the consultant forwarded a report encouraging the firm to take on the new product production. The firm is contemplating using a vacant land that it owns. As a parking lot the land generates $10,000 per year. The firm determined that it will cost $2,000,000 to purchase the required machine to produce the product. It would also require $25,000 to get the machine and install it. The equipment would generate pre-tax cash flow of $700,000 per year for the ten years. Maintenance costs for the equipment are reasonable, $24,000 per year. The equipment will be sold for $200,000 after ten years. This project will require an investment of $20,000 for net working capital, which will be freed up at the end of the project. Themachine falls in an asset class with a CCA rate of 20% and the asset class is open. The firm's tax rate is 40%. If the firm's required rate of retum for this type of projects is 10%, should the firm take the project? Problem 5 (15 marks) Fun Inc. is a leading producer of printer ink. The company is considering two alternative production method under which it may use two different machines for producing ink. The costs and lives associated with each is given below. Interestingly, none of the machine will fetch any value at the end of the project. If the firm's discount rate is 13%, tax rate is 39%, and the CCA rate for this class of assets is 25%, which method of production the firm should select and why? Show your computation fo make the conclusion and use tax shield formula method to solve the problem. Year Machine 1 Machine 2 0 $6,700 $9,900 1 400 620 2 400 620 3 400 620 4 620