Question 1 (15 marks) The Analtoly Corporation is an electronics dealer and distributor. Sales for the last year were $4.5 million, and cost of goods sold was $2 million and operating expenses totaled $1.2 million. Analtoly also paid $150,000 in interest expense, and depreciation expense totaled $50,000. In addition, the company sold securities for $120,000 that it had purchased 4 years earlier at a price of $40,000 2 a. Compute Taxable Income (5 marks) b. Compute the tax liability for Analtoly. (5 marks) Corporate Tax Rates Taxable income Corporate Tax Rate $1 - $50,000 15% $50,001 - $75,000 25% $75,001 - $10 million 34% over $10 million 35% and $100,000 - $335,000 5% surtax $15m - $18.333 m 3% surtax Apply the usual important considerations. 2 c] Explain objectives of Corporate Financial Management. (500 words) (5 marks) 1. (Inflation and Interest Rates) What would you expect the nominal rate of interest to be if the real rate is 4 percent and the expected inflation rate is 7 percent? 2. (Expected Rate of Return and Risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return? 3. (Common Stock Valuation) Header Motor, Inc., paid a $3.50 dividend last year. At a constant growth rate of 5 percent, what is the value of the common stock if the investors require a 20-percent rate of return? 24. (Preferred Stock Valuation) What is the value of a preferred stock where the dividend rate is 14 percent on a $100 par value? The appropriate discount rate for a stock of this risk level is 12 percent. 6.5. (Cost of Trade Credit) Calculate the effective cost of the following trade credit terms where payment is made on the net due date. 6. (Trade Credit Discounts) Determine the effective annualized cost of forgoing the trade credit discount on the following terms: 7. A) Calculate Economic Ordering Quantity (EOQ) if cost of carrying 1 unit in inventory = $24 8. Calculate Chim Inc. Weighted Cost of Capital based on following information of their capital sources and structure: 9. Explain any 5 axioms of finance with real examples. (500 words) 10. "Finance managers spend up to 60 percent of their time in working capital management." Explain the importance of working capital management.(500 words)