UNIT 1: TEXTBOOK PROBLEMS

CHAPTER 2: PROBLEM 1

Current Assets $6,800

Net Fixed Assets $29,400

Current Liabilities $5,400

Long-Term Debt $13,100

Shareholder Equity =?

Net Working Capital = ?

CHAPTER 2: PROBLEM 2

Income Statement

Sales $528,600

Costs $264,400

Depreciation Expense $41,700

EBIT=?

Interest Expense $20,700

EBT=?

Taxes @ 35%

Net Income =?

Cash Dividends $27,000

Addition to Retained Earnings =?

Tax Rate = 35%

CHAPTER 2: PROBLEM 4

Taxable Income $328,500

Table 2.3

Taxable Income Taxable Income (cont) Tax Rate

0 50,000 15%

50,001 75,000 25% 75,001 100,000 34%

100,001 335,000 39% 335,001 10,000,000 34%

10,000,001 15,000,000 35% 15,000,001 18,333,333 38%

18,333,334 + 35%

Income Taxes =?

Average Tax Rate = ?

Marginal Tax Rate = ? (Note: No formula needed. Just input the correct rate from the Tax Rate column)

CHAPTER 2: PROBLEM 5

Sales $30,700

Costs $11,100

Depreciation Expense $2,100

EBIT = ?

Interest Expense $1,140

EBT=?

Taxes @ 40%

Net Income

Tax Rate 40%

Operating Cash Flow =?

CHAPTER 3: PROBLEM 2

Debt/Equity Ratio 0.75

Return on Assets 8.60%

Total Equity $975,000

Equity Multiplier =?

Return on Equity = ?

Net Income = ?

CHAPTER 3: PROBLEM 6

ROE 15%

Payout Ratio 25%

Retention Ratio= ? (Note: You must calculate the retention ratio first then the sustainable growth rate)

Sustainable Growth Rate= ?