Question

In: Finance

1) Wick Inc., has sales of $889,095.00, operating costs (not including depreciation) of $320,074.20, depreciation expense...

1) Wick Inc., has sales of $889,095.00, operating costs (not including depreciation) of $320,074.20, depreciation expense of $124,473.30, interest expense of $62,236.65, and a tax rate of 38.00%. What is the net income for this firm?

a. $237,032.73

b. $237,032.73

c. $145,278.12

d. $168,928.05

2)Given the following Financial Information Answer the following question:

	2017	2018
Cash	3,000	461,305
Accounts Receivable	9,000	9,900
Inventory	5,000	5,500
Prepaid Assets	3,000	3,300
Other Assets	5,000	5,500
Total Current Assets	25,000	485,505
Net PPE	80,000	67,000
Intangibles	1,000	1,000
Total Assets	106,000	553,505
Accounts Payable	3,000	3,300
Salary Payable	1,000	1,100
Notes Payable	1,000	1,000
Total Current Liabilities	5,000	5,400
Long-Term Debt	70,000	70,000
Total Liabilities	75,000	75,400
Common Stock	40,000	40,000
Retained Earnings	-9,000	438,105
total equity	31,000	478,105

	2018
Sales	2,965,000
COGS	2,223,750
Gross Profit	741,250
SG&A	12,000
Other Operating Expenses	13,000
Depreciation	8,000
Interest	6,785
Taxes	223,481
Net Income	485,984
dividends	38,879

Calculate the Change in Net Operating Working Capital (NOWC)

a. $ -460,504.82

b. $ 460,504.82

c. $ 460,104.82

d. $ -460,104.82

3)

Reihing Inc., 's current balance sheet shows total common equity of $1,667,544.00. The company has 340,000.00 shares of stock outstanding, and they sell at a price of $5.49 per share. By how much do the firm's book value and market value per share differ?

a. $-0.59

b. $4.90

c. $5.49

d. $0.59

Expert Solution

1. Net income is calculated by using the below formula:

= ( Sales - Operating Cost - Depreciation - Interest Expenses ) - Taxes

= ( $ 889,095 - $ 320,074.20 - $ 124,473.30 - $ 62,236.65 ) - Taxes @ 38%

= $ 382,310.85 - 38%

= $ 237,032.73 Approximately

So option a and b is the correct answer since both options are similar.

2. Change in Net Operating Working Capital is calculated by using the below formula:

= Net Operating Working Capital of 2018 - Net Operating Working Capital of 2017

Net Operating Working Capital of 2018 = Total Current Assets - Total Current Liabilities

= $ 485,505 - $ 5,400

= $ 480,105

Net Operating Working Capital of 2017 = Total Current Assets - Total Current Liabilities

= $ 25,000 - $ 5,000

= $ 20,000

So the change in Net Operating Working Capital is

= $ 480,105 - $ 20,000

= $ 460,105

So option c is the correct answer

3. Firm's book value is calculated by using the below formula:

= Total Common Equity / No of Shares Outstanding

= $ 1,667,544 / 340,000

= $ 4.90 per share Approximately

Market Value = $ 5.49 per share

So the firm's book value and market value per share differ by

= $ 4.90 - $ 5.49

=$ - 0.59 per share

So the correct answer is option a.

jeff jeffy answered 3 months ago

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