Demonstrate your understanding of financial concepts by completing the following problems. Where appropriate, show or explain your work. You may use Excel to work the problems.
Problem 1. Building a Balance Sheet: Jones, Incorporated has net fixed assets of $22,500, current assets of $8,200, current liabilities of $6,400, and long-term debt of $12,500. What is the value of the company's stockholders equity and net working capital?
Problem 2. Building an Income Statement: Tanner, Incorporated has sales of $863,000, costs of $407,000, depreciation expenses of $58,000, and interest expenses of $23,600, with a tax rate of 35 percent. Calculate the net income for the firm. If the company paid out $77,000 in cash dividends, calculate the increase to retained earnings.
Problem 3. Calculating Operating Cash Flow: Willard, Incorporated has sales of $26,400, costs of $9,400, depreciation expense of $1,500, interest expense of $925, and a tax rate of 40 percent. Calculate the operating cash flow.
Problem 4. Equity Multiplier and Return on Equity: Drake Company has a return on assets of 10.75 percent, total equity of $875,000, and a debt-equity ratio of 0.85. What is the equity multiplier? What is the return on equity? What is the net income?
Problem 5. Sustainable Growth: GTS Corporation has a 12 percent ROE and a 30 percent payout ratio. Calculate its sustainable growth rate.
Problem 6. Calculating Taxable Income: The Conrad Company has $267,000 in taxable income. Using the rates on the taxable income table below, calculate their average tax rate and marginal 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%
|