11. Boom Corporation had operating income of $235,000 and a 40% tax rate. The firm had short-term debt of $115,000, long-term debt of $321,000, and common equity of $436,000. What was its return on invested capital (ROIC)? *

5 points

10.78%

16.17%

18.63%

26.95%

None of the above

12. Last year, Banda Corporation had $250,000 of assets (which equaled its total invested capital), $18,750 of net income, and a debt-to-total-capital ratio of 37%. Now, suppose that the new CFO convinced the president to increase the debt-to-total-capital ratio to 48%. Sales, total assets, and total invested capital would not be affected, but interest expenses would increase. However, the CFO believed that better cost controls would be sufficient to offset the higher interest expense and thus keep net income unchanged. By how much would the return on common equity (ROE) improve as a result of the change in the capital structure? Do not round your intermediate calculations. *

5 points

2.52%

11.00%

11.90%

14.42%

None of the above

13. Last year, Yukon Company reported $10,500,000 of sales, $6,250,000 of operating costs (excluding depreciation), and $1,300,000 of depreciation. The company had $5,000,000 of bonds that carried a 6.5% interest rate, and its federal-plus-state income tax rate was 35%. This year's data were expected to remain unchanged except for one item, depreciation, which was expected to increase by $630,000. The company uses the same depreciation calculations for tax and stockholder reporting purposes. By how much would the net income change as a result of the change in depreciation? *

5 points

The net income would decrease by $409,500

The net income would decrease by $220,500

The net income would decrease by $630,000

The net income would decrease by $1,296,750

None of the above

14. Honan Company sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were $950,000, and its year-end receivables were $170,000. If the result of the days sales outstanding (DSO) is less than the 45-day credit period, then customers are paying on time. Otherwise, they are paying late. By how many days early or late were customers paying? Use a 365-day year in your calculations and assume that all sales were done on credit. Do not round your intermediate calculations. *

5 points

17.89 days early

20.32 days early

20.32 days late

65.32 days late

None of the above

15. A firm had a current ratio of 2, long-term debt of $31,000, total liabilities of $48,500, sales of $218,400, net profit margin of 25%, interest expense of $9,000, a tax rate of 40%, a fixed assets turnover ratio of 1.456. What was the firm's basic earning power (BEP) ratio? *

5 points

0.18

0.29

0.54

1.257

None of the above