The year-end 2018 balance sheet of Brandex Inc. listed common stock and other paid-in capital at $3,000,000 and retained earnings at $5,300,000. The next year, retained earnings were listed at $5,600,000. The firm's net income in 2019 was $1,090,000. There were no stock repurchases during the year. What were the dividends paid by the firm in 2019?

What is the dividend paid?

a&b. What is shareholders' equity in 2018 and 2019?

c&d. What is networking capital in 2018 and 2019?

e. What are taxes paid in 2019? Assume the firm pays taxes equal to 21% of taxable income.

f. What is cash provided by operations during 2019?

g. Net fixed assets increased from $910 million to $1,010 million during 2019. What must have been South Sea's gross investment in fixed assets during 2019?

 

Q:

The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $600,000 in setting up a production plant. He believes that he could sell his patent for $75 million.

 

a. What is the book value of the firm? 

b. What is the market value of the firm?

c. If there are two million shares of stock in the new corporation, what would be the book value per share? 

d. If there are two million shares of stock in the new corporation, what would be the price per share? 

Q:

Sheryl's Shipping had sales last year of $16,500. The cost of goods sold was $7,800, general and administrative expenses were $2,300, interest expenses were $1,800, and depreciation was $2,300. The firm's tax rate is 21%.

 

a.    What are earnings before interest and taxes?

b.    What is net income

c.     What is cash flow from operation

Q:

You have set up your tax preparation firm as an incorporated business. You took $75,000 from the firm as your salary. The firm's taxable income for the year (net of your salary) was $31,000. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3.6.

 

a. How much tax must be paid to the federal government, including both your personal taxes and the firm's taxes? 

 

 b. By how much will you reduce the total tax bill if you cut your salary to $53,000, thereby leaving the firm with taxable income of $53,000?

 

 c. What allocation will minimize the total tax bill?