Solved by verified expert :2.Corporate Tax Liability
To complete the assignments listed below, refer
to theTable 2-1.
The Talley Corporation had a taxable income of
$300,000 from operations after all operating costs but before (1) interest
charges of $30,000, (2) dividends received of $18,000, (3) dividends paid of
$18,000, and (4) income taxes.
What are the firm’s income tax liability and its
after-tax income? Round your answers to two decimal places.
Income tax liability
$
After-tax income
$
3.Balance Sheet Analysis
Complete the balance sheet and sales
information in the table that follows for J. White Industries using the
following financial data:
Total assets turnover: 2.1
Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 24%
Total liabilities-to-assets ratio: 35%
Quick ratio: 1.05
Days sales outstanding (based on 365-day year): 36 days
Inventory turnover ratio: 3.0
Round your answers to the nearest whole
dollar.
Partial Income
Statement
Information
Sales
$
Cost of goods sold
$
Balance Sheet
Cash
$
Accounts payable
$
Accounts receivable
$
Long-term debt
$ 50,000
Inventories
$
Common stock
$
Fixed assets
$
Retained earnings
$ 100,000
Total assets
$ 400,000
Total liabilities and equity
$
4. PV and Effective Annual Rate
Assume that you inherited some money.
A friend of yours is working as an unpaid intern at a local brokerage firm, and
her boss is selling securities that call for 4 payments of $50 (1 payment at
the end of each of the next 4 years) plus an extra payment of $1,000 at the end
of Year 4. Your friend says she can get you some of these securities at a cost
of $950 each. Your money is now invested in a bank that pays an 12% nominal
(quoted) interest rate but with quarterly compounding. You regard the
securities as being just as safe, and as liquid, as your bank deposit, so your
required effective annual rate of return on the securities is the same as that
on your bank deposit. You must calculate the value of the securities to decide
whether they are a good investment. What is their present value to you? Round
your answer to the nearest cent.
$
5.Amortization Schedule
a.
Set up an amortization schedule
for a $15,000 loan to be repaid in equal installments at the end of each of the
next 5 years. The interest rate is 12%. Round your answers to the nearest cent.
Enter “0” if required
Year
Payment
Repayment Interest
Repayment of Principal
Balance
1
$
$
$
$
2
$
$
$
$
3
$
$
$
$
4
$
$
$
$
5
$
$
$
$
Total
$
$
$
b. How large must each annual payment be if the loan is for $30,000?
Assume that the interest rate remains at 12% and that the loan is paid off over
5 years. Round your answer to the nearest cent.
$
c.
How large must each payment
be if the loan is for $30,000, the interest rate is 12%, and the loan is paid
off in equal installments at the end of each of the next 10 years? This loan is
for the same amount as the loan in part b, but the payments are spread out over
twice as many periods. Round your answer to the nearest cent.
$
6. Free Cash Flows
Rhodes Corporation: Income
Statements for Year Ending December 31 (Millions of Dollars)
2013
2012
Sales
$8,450.0
$6,500.0
Operating costs excluding depreciation
6,971.0
5,525.0
Depreciation and amortization
203.0
163.0
Earnings before interest and taxes
$1,276.0
$812.0
Less: Interest
182.0
140.0
Pre-tax income
$1,094.0
$672.0
Taxes (40%)
437.6
268.8
Net income available to common stockholders
$656.4
$403.2
Common dividends
$591.0
$323.0
Rhodes Corporation: Balance
Sheets as of December 31 (Millions of Dollars)
2013
2012
Assets
Cash
$86.0
$78.0
Short-term investments
43.0
33.0
Accounts receivable
894.0
715.0
Inventories
2,028.0
1,560.0
Total current assets
$3,051.0
$2,386.0
Net plant and equipment
2,031.0
1,625.0
Total assets
$5,082.0
$4,011.0
Liabilities and Equity
Accounts payable
$468.0
$390.0
Accruals
215.0
195.0
Notes payable
169.0
130.0
Total current liabilities
$852.0
$715.0
Long-term bonds
1,690.0
1,300.0
Total liabilities
$2,542.0
$2,015.0
Common stock
2,354.6
1,876.0
Retained earnings
185.4
120.0
Total common equity
$2,540.0
$1,996.0
Total liabilities and equity
$5,082.0
$4,011.0
Using Rhodes Corporation’s financial statements
(shown above), answer the following questions.
a. What is the net operating profit after taxes (NOPAT) for 2013?
Enter your answer in millions. For example, an answer of $1.2 million should be
entered as 1.2, not 1,200,000. Round your answer to one decimal place.
$ million
b. What are the amounts of net operating working capital for both
years? Enter your answer in millions. For example, an answer of $1.2 million
should be entered as 1.2, not 1,200,000. Round your answers to one decimal
place.
2013 $ million
2012 $ million
c. What are the amounts of total net operating capital for both
years? Enter your answer in millions. For example, an answer of $1.2 million
should be entered as 1.2, not 1,200,000. Round your answers to one decimal
place.
2013 $ million
2012 $ million
d. What is the free cash flow for 2013? Enter your answer in
millions. For example, an answer of $1.2 million should be entered as 1.2, not
1,200,000. Round your answer to one decimal place.
$ million
e. What is the ROIC for 2013? Round your answer to two decimal
places.
%
f.
How much of the FCF did
Rhodes use for each of the following purposes: after-tax interest, net debt
repayments, dividends, net stock repurchases, and net purchases of short-term
investments? (Hint:Remember that a net use can be negative.) Enter your answer in
millions. For example, an answer of $1.2 million should be entered as 1.2, not
1,200,000. Round your answers to one decimal place.
After-tax interest payment
$ million
Reduction (increase) in debt
$ million
Payment of dividends
$ million
Repurchase (Issue) stock
$ million
Purchase (Sale) of short-term investments
$ million
7.Future Value of an Annuity for Various
Compounding Periods
Find the future values of the following ordinary
annuities:
a. FV of $600 paid each 6 months for 5 years at a nominal rate of
16%, compounded semiannually. Round your answer to the nearest cent.
$
b. FV of $300 paid each 3 months for 5 years at a nominal rate of
16%, compounded quarterly. Round your answer to the nearest cent.
$
9.Comprehensive Ratio Analysis
Data for Lozano Chip Company and its industry averages
follow.
Lozano Chip Company: Balance Sheet as of December 31, 2013
(Thousands of Dollars)
Cash
$ 225,000
Accounts payable
$601,866
Receivables
1,575,000
Notes payable
326,634
Inventories
1,125,000
Other current liabilities
525,000
Total current assets
$2,925,000
Total current liabilities
$1,453,500
Net fixed assets
1,350,000
Long-term debt
1,068,750
Common equity
1,752,750
Total assets
$4,275,000
Total liabilities and equity
$4,275,000
Lozano Chip Company: Income Statement for Year Ended
December 31, 2013 (Thousands of Dollars)
Sales
$7,500,000
Cost of goods sold
6,375,000
Selling general and administrative expenses
825,000
Earnings before interest and taxes (EBIT)
$ 300,000
Interest expense
111,631
Earnings before taxes (EBT)
$ 188,369
Federal and state income taxes (40%)
75,348
Net income
$ 113,022
a.
Calculate the indicated ratios for
Lozano. Round your answers to two decimal places.
Ratio
Lozano
Industry Average
Current assets/Current liabilities
2.0
Days sales outstanding*
days
35.0 days
COGS/Inventory
6.7
Sales/Fixed assets
12.1
Sales/Total assets
3.0
Net income/Sales
%
1.2%
Net income/Total assets
%
3.6%
Net income/Common equity
%
9.0%
Total debt/Total assets
%
30.0%
Total liabilities/Total assets
%
60.0%
*Calculation is based on a 365-day year.
b.
Construct the extended Du Pont
equation for both Lozano and the industry. Round your answers to two decimal
places.
For the firm, ROE is
%
For the industry, ROE is
%
c. Outline Lozano’s strengths and weaknesses as revealed by your
analysis
