UNIT 1- TEXTBOOK PROBLEMS

# UNIT 1- TEXTBOOK PROBLEMS

 UNIT 1: TEXTBOOK PROBLEMS CHAPTER 2: PROBLEM 1 Current Assets \$6,800 Net Fixed Assets \$29,400 Current Liabilities \$5,400 Long-Term Debt \$13,100 Shareholder Equity = Net Working Capital = CHAPTER 2: PROBLEM 2 Income Statement Sales \$528,600 Costs \$264,400 Depreciation Expense \$41,700 EBIT Interest Expense \$20,700 EBT Taxes @ 35% Net Income = Cash Dividends \$27,000 Addition to Retained Earnings = Tax Rate = 35% CHAPTER 2: PROBLEM 4 Taxable Income \$328,500 Table 2.3 Taxable Income Taxable Income (cont) Tax Rate 0 50,000 15% 50,001 75,000 25% 75,001 100,000 34% 100,001 335,000 39% 335,001 10,000,000 34% 10,000,001 15,000,000 35% 15,000,001 18,333,333 38% 18,333,334 + 35% Income Taxes = Average Tax Rate = Marginal Tax Rate = (Note: No formula needed. Just input the correct rate from the Tax Rate column) CHAPTER 2: PROBLEM 5 Sales \$30,700 Costs \$11,100 Depreciation Expense \$2,100 EBIT Interest Expense \$1,140 EBT Taxes @ 40% Net Income Tax Rate 40% Operating Cash Flow = CHAPTER 3: PROBLEM 2 Debt/Equity Ratio 0.75 Return on Assets 8.60% Total Equity \$975,000 Equity Multiplier = Return on Equity = Net Income = CHAPTER 3: PROBLEM 6 ROE 15% Payout Ratio 25% Retention Ratio (Note: You must calculate the retention ratio first then the sustainable growth rate) Sustainable Growth Rate =