Problem 2-7 Corporate Taxes (LG2-3) 1 Oakdale Fashions, Inc. had $370,000 in 2018 taxable income. Using the tax schedule in Table 2.3 to calculate the company's 2018 income taxes. (Round your answer to the nearest dollar amount.) 0/8.33 points awarded Income taxes $ 78,800 x Scored eBook Hint Print What is the average tax rate? (Round your answer to 2 decimal places.) References Average tax rate 32.16 X % What is the marginal tax rate? Marginal tax rate 39 X % Problem 2-14 Statement of Retained Earnings (LG2-1) 6 Use the following information to find dividends paid to common stockholders during 2018. (Enter your answers in millions of dollars.) 0/8.33 points awarded (in millions of dollars) $ 486 Scored 25 Balance of retained earnings, December 31, 2017 Plus: Net income for 2018 Less: Cash dividends paid Preferred stock Common stock eBook $ 2 Hint 23 x 25 X Print Total cash dividends paid Balance of retained earnings, December 31, 2018 $ 496 References Problem 2-20 Debt versus Equity Financing (LG2-1) 10 You are considering a stock investment in one of two firms (No Equity, Inc. and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $7.5 million. NoEquity, Inc. finances its $35 million in assets with $34 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc. finances its $35 million in assets with no debt and $35 million in equity. Both firms pay a tax rate of 30 percent on their taxable income. 4.17/8.33 points awarded Scored Calculate the net income and return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.) eBook NoEquity NoDebt Hint $ 2.87 x million $ 5.25 million Income available for asset funders Return on asset-funders' investment Print 8.20 X % 15.00 % References Problem 2-25 Corporate Taxes (LG2-3) 11 The Dakota Corporation had a 2015 taxable income of $35,000,000 from operations after all operating costs but before (1) interest charges of $9,500,000, (2) dividends received of $880,000, (3) dividends paid of $5,900,000, and (4) income taxes. 5.55/8.33 points awarded a. Use the tax schedule in Table 2.3 to calculate Dakota's income tax liability. (Round your answer to the nearest dollar amount.) Scored Income tax liability $ 9,071,400 X eBook Hint Print b. What are Dakota's average and marginal tax rates on taxable income? (Round your answers to 2 decimal places.) References 35.00 % Average tax rate Marginal tax 35.00% rate Problem 2-19 Debt versus Equity Financing (LG2-1) 9 You are considering a stock investment in one of two firms (No Equity, Inc. and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $27.5 million. NoEquity, Inc. finances its $50 million in assets with $49 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc. finances its $50 million in assets with no debt and $50 million in equity. Both firms pay a tax rate of 30 percent on their taxable income. 0/8.33 points awarded Scored Calculate the net income and return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.) eBook NoDebt NoEquity $ 22.60 x million Net income $ 27.50 X million Hint Return on assets 32.00 X % 39.00 X % Print References Problem 2-18 Market Value versus Book Value (LG2-2) 8 Ava's SpinBall Corp. lists fixed assets of $26 million on its balance sheet. The firm's fixed assets have recently been appraised at $44 million. Ava's SpinBall Corp.'s balance sheet also lists current assets at $19 million. Current assets were appraised at $34 million. Current liabilities' book and market values stand at $9 million and the firm's book and market values of long-term debt are $16 million. 5.83/8.33 points awarded Calculate the book and market values of the firm's stockholders' equity. Construct the book value and market value balance sheets for Ava's SpinBall Corp. (Enter your answers in millions of dollars.) Scored eBook BOOK MARKET VALUE VALUE (in millions of dollars) Hint Assets Current assets Print $ 19 $ 34 References Fixed assets 26 44 Total $ 45 $ 78 Liabilities and Equity Current liabilities 9 $ 9 Long-term debt 16 24 X Stockholders' 16 X 32 x equity Total 41 $ 65 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. table 2.3 Corporate Tax Rates as of 2018 Taxable Income Pay this Amount on Base Income Plus this Percentage on Anything Over the Base 15% 25 34 $0-$50,000 $50,001-$75,000 $75,001-$100,000 $100,001-$335,000 $335,001-$10,000,000 $10,000,001-$15,000,000 $15,000,001-$18,333,333 Over $18,333,333 $ 0 7,500 13,750 22,250 113,900 3,400,000 5,150,000 6,416,667 39 34 35 38 35