1) Building a Balance Sheet Bishop, Inc., has current assets of $5,700, net fixed assets of $27,000, current liabiities of $4,400, and long-term debt of $12,900.

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1) Building a Balance Sheet Bishop, Inc., has current assets of $5,700, net fixed assets of $27,000, current liabiities of $4,400, and long-term debt of $12,900. What is the value of the shareholders equity account for this firm? How much is net working capital?

 

 

 

 

 

3) Market Values and Book Values Klingon Cruisers, Inc., purchased new cloaking machinery three years ago for $9.5 million. The machinery can be sold to the Romulans today for $6.5 million. Klingon’s current balance sheet shows net fixed assets of $5.2 million, current liabiities of $2.4 million, and net working capital of $800,000. If all the current assets were liquidated today, the company would receive $2.6 million cash. What is the book value of Klingon’s assets today? What is the market value?

 

 

 

 

 

4) Calculating Taxes The Locker Co. had $273,000 in taxable income. Using the rates from Table 2.3 in the chapter, calculate the company’s income taxes. What is the average tax rate? What is the marginal tax rate?

 

 

 

13) Building an Income Statement During the year, the Senbet Discount Tire Company had gross sales of $1.06 million. The firm’s cost of goods sold and selling expenses were $525,000 and $215,000, respectively. Senbet also had notes payable of $800,000. These notes carried an interest rate of 7 percent. Depreciation was $130,000. Senbet’s tax rate was 35 percent. a. What was Senbet’s net income? b. What was Senbet’s operating cash flow?

 

 

 

21) Calculating Cash Flows Consider the following abbreviated financial statements for Weston Enterprises:

 

 

 

22) Financial Statements Draw up an income statement and balance sheet for this company for 2011 and 2012.

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Strayer University FIN 534 Week 1-11 Quiz

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Strayer University FIN 534 Week 1-11 Quiz

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Instructions This quiz consist of 15 multiple choice questions and covers the material in Chapter 1. Be sure you are in Chapter 1 when you take the quiz.

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Instructions This quiz consist of 15 multiple choice questions and covers the material in Chapter 1. Be sure you are in Chapter 1 when you take the quiz.

•  Question 1
0 out of 2 points

Which of the following statements is CORRECT?

•  Question 2
2 out of 2 points

Which of the following statements is CORRECT?

•  Question 3
2 out of 2 points

Which of the following statements is CORRECT?

•  Question 4
2 out of 2 points

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

•  Question 5
0 out of 2 points

•  Question 6
0 out of 2 points

Jane Doe, who has substantial personal wealth and income, is considering the possibility of starting a new business in the chemical waste management field.  She will be the sole owner, and she has enough funds to finance the operation.  The business will have a relatively high degree of risk, and it is expected that the firm will incur losses for the first few years.  However, the prospects for growth and positive future income look good, and Jane plans to have the firm pay out all of its income as dividends to her once it is well established. Which of the legal forms of business organization would probably best suit her needs?

•  Question 7
0 out of 2 points

Which of the following statements is CORRECT?

•  Question 8
2 out of 2 points

Money markets are markets for

•  Question 9
2 out of 2 points

Which of the following statements is CORRECT?

•  Question 10
0 out of 2 points

With which of the following statements would most people in business agree?

•  Question 11
0 out of 2 points

Which of the following statements is CORRECT?

•  Question 12
2 out of 2 points

Which of the following statements is CORRECT?

•  Question 13
2 out of 2 points

Which of the following statements is CORRECT?

•  Question 14
2 out of 2 points

Which of the following is a primary market transaction?

•  Question 15
2 out of 2 points

You recently sold to your brother 200 shares of Disney stock, and the transfer was made through a broker, and the trade occurred on the NYSE.  This is an example of:

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What is the NPV if the discount rate is 13.31 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)

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Year       Cash Flow

1              $548,422

2              -204,640

3              985,289

4              770,821

5              693,472

 

What is the NPV if the discount rate is 13.31 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)

 

NPV is   $

 

2.Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.10 million. This investment will consist of $2.90 million for land and $9.20 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.30 million, $2.07 million above book value. The farm is expected to produce revenue of $2.04 million each year, and annual cash flow from operations equals $1.91 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2decimal places, e.g. 15.25.)

 

NPV                       $

 

The project should be                                    .

 

 

3.Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain’s opportunity cost of capital is 17.5 percent, and the costs and values of investments made at different times in the future are as follows:

 

Year       Cost       Value of Future Savings

(at time of purchase)

0              $5,000   $7,000

1              4,650     7,000

2              4,300     7,000

3              3,950     7,000

4              3,600     7,000

5              3,250     7,000

 

Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)

The NPV of each choice is:

NPV0 = $

NPV1 = $

NPV2 = $

NPV3 = $

NPV4 = $

NPV5 = $

Suggest when should Bell Mountain buy the new accounting system?

Bell Mountain should purchase the system in .

 

4. Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 92 percent as high if the price is raised 16 percent. Chip’s variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firm’s FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)

At $20 per bottle the Chip’s FCF is $                                and at the new price Chip’s FCF is $.

 

5.Capital Co. has a capital structure, based on current market values, that consists of 43 percent debt, 9 percent preferred stock, and 48 percent common stock. If the returns required by investors are 9 percent, 11 percent, and 16 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

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