A firm is 100% equity financed and has a 28% tax rate. It has operating income of $135,000, depreciation expense of $25,750 and its investment in operating capital is $40,000. What is the firm's operating cash flow?

A. less than $118,250

B. more than $118,250 but less than $121,500

C. more than $121,500 but less than $124,750

D. more than $124,750 but less than $128,000

E. more than $128,000

. Yellow Knife, Inc.'s 2010 income statement lists the following income and expenses: sales = $1,265,000, operating expenses and depreciation = $312,000, EBIT = $554,000, Interest expense = $162,000, and Taxes = $146,000. Yellow Knife, Inc. has no preferred stock outstanding and 100,000 shares of common stock outstanding. Calculate the 2010 earnings per share.

A. $3.92 B. $4.08

C. $4.03 D. $2.19 E. $2.46 13. Down Coats, Inc. originally forecasted the following financial data for next year: Sales = $800,000, Cost of goods sold = $500,000, operating expense and depreciation = $87,500 and Interest expense = $24,000. The firm believes that COGS will always be 62.5% of sales. Suppose the firm wants to achieve a net income of $160,000. Assuming the operating costs, depreciation and interest expense will remain the same, how large must sales be to achieve this goal? Assume a 32% tax rate.

A. more than $930,000

B. more than $905,000 but less than $930,000

C. more than $880,000 but less than $905,000

D. more than $855,000 but less than $880,000

E. less than $855,000

Winnie Peg, Inc. balance sheet lists net fixed assets as $20 million. The fixed assets could currently be sold for $25 million. Winnie Peg's current balance sheet shows current liabilities of $7 million and net working capital of $3 million. If all the current accounts were liquidated today, the company would receive $9 million cash after paying $7 million in liabilities. What is the book value of Winnie Pegs assets today? What is the market value of these assets?

A. $10 million, $16 million B. $10 million, $35 million

C. $30 million, $35 million D. $30 million, $41 million E. more than $30 million, more than $41 million

You are considering a stock investment in one of two firms (AllDebt, Inc. and AllEquity, Inc.), both of which operate in the same industry and have identical operating income of $3 million. AllDebt, Inc. finances its $6 million in assets with $5 million in debt (on which it pays 5 percent interest annually) and $1 million in equity. AllEquity, Inc. finances its $6 million in assets with no debt and $6 million in equity. Both firms pay a tax rate of 40 percent on their taxable income. What are the asset funders' (the debt holders and stockholders') resulting return on assets for the two firms? (Hint: Interest is a return to the asset funders)

A. 27.5%, and 30.0%, respectively

B. 30.0%, and 27.5%, respectively

C. 31.7%, and 30.0%, respectively

D. 33.3%, and 30.0%, respectively

E. 50.0%, and 50.0%, respectively