Question 1:

Use the following information to find dividends paid to common stockholders during 2015. (Input all amounts as positive values. Enter your answers in millions.)

2015

Balance of retained earnings, December 31, 2014

$

470

m

Plus: Net income for 2015

35

m

Less: Cash dividends paid

Preferred stock

$

1

m

Common stock

m

Total cash dividends paid

m

Balance of retained earnings, December 31, 2015

$

492

m

Question 2:

The Dakota Corporation had a 2015 taxable income of $32,500,000 from operations after all operating costs but before (1) interest charges of $8,500,000; (2) dividends received of $750,000; (3) dividends paid of $5,250,000; and (4) income taxes.

a.	Use the tax schedule in Table 2.3 to calculate Dakotas income tax liability. (Round your answer to the nearest dollar amount.)

Income tax liability

$

b.	What are Dakotas average and marginal tax rates on taxable income? (Round your answers to the nearest whole percent.)

Average tax rate	%
Marginal tax rate	%

Question 3:

Oakdale Fashions, Inc., had $360,000 in 2015 taxable income.

Use the tax schedule in Table 2.3 to calculate the companys 2015 income taxes.

Income taxes

$

What is the average tax rate? (Round your answer to 2 decimal places.)

Average tax rate

%

What is the marginal tax rate?

Marginal tax rate

%

Question 4:

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 $8.00 million. AllDebt, Inc., finances its $30 million in assets with $29 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Inc., finances its $30 million in assets with no debt and $30 million in equity. Both firms pay a tax rate of 30 percent on their taxable income.

Calculate the income available to pay the asset funders (the debt holders and stockholders) and resulting return on asset-funders' investment for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.)

AllDebt

AllEquity

Income available for asset funders

$ m

$ m

Return on asset-funders' investment

%

%

Question 5:

Mr. Huskers Tuxedos Corp. began the year 2015 with $280 million in retained earnings. The firm earned net income of $45 million in 2015 and paid dividends of $6 million to its preferred stockholders and $15 million to its common stockholders.

What is the year-end 2015 balance in retained earnings for Mr. Huskers Tuxedos? (Enter your answer in millions of dollars.)

Retained earnings

$ m