Georgia Office Supplies recently reported $12,500 of sales, $7,250 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding that carry a 7.5% interest rate, and its federal-plus-state income tax rate was 40%. The firm had 1,000 shares outstanding.

1) How much was the firm's taxable income, or earnings before taxes (EBT)?

EBT = $12,500 - $7,250 - $1,250 - (.075 x $8,000) = $3,400

2) What is the firm’s earnings per share (EPS), assuming a Dividend of $100?

The expected pretax return on three stocks is divided between dividends and capital gains in the following way:

a. If each stock is priced at $195, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 45% (the effective tax rate on dividends received by corporations is 10.5%), and (iii) an individual with an effective tax rate of 10% on dividends and 5% on capital gains? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b. Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Stock Price
A
B
C

A proposed cost-saving device has an installed cost of $655,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $65,000, the marginal tax rate is 22 percent, and the project discount rate is 11 percent. The device has an estimated Year 5 salvage value of $56,000. What level of pretax cost savings do we require for this project to be profitable? MACRS schedule. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

You are given the following information: Stock Expected return (in %) σ (in %) A 10 10 B 5 5 The covariance between these returns is 16%2 . The risk-free rate is 6%. (a) Find the expected return and standard deviation of the following portfolios: i. 50% in A, 50% in B ii. 50% in A, 50% in the risk-free asset iii. 150% in A, financed by borrowing at the risk-free rate

Lemon Auto Wholesalers had sales of $1,570,000 last year, and cost of goods sold represented 70 percent of sales. Selling and administrative expenses were 12 percent of sales. Depreciation expense was $14,000 and interest expense for the year was $15,000. The firm’s tax rate is 30 percent. a. Compute earnings after taxes. b-1. Assume the firm hires Ms. Carr, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 14 percent of sales, sales can be increased to $1,620,600. The extra sales effort will also reduce cost of goods sold to 66 percent of sales. (There will be a larger markup in prices as a result of more aggressive selling.) Depreciation expense will remain at $14,000. However, more automobiles will have to be carried in inventory to satisfy customers, and interest expense will go up to $22,600. The firm’s tax rate will remain at 30 percent. Compute revised earnings after taxes based on Ms. Carr’s suggestions for Lemon Auto Wholesalers. (Round taxes and earnings after taxes to 1 decimal place.) b-2. Will her ideas increase or decrease profitability? Increase profitability Decrease profitability

You are the financial manager of a firm manufacturing headphones. You just announced that this year’s profits are $2 million. Analysts predict your profits will grow at 5% each year for the next three years and then profit growth will slow to 3%per year and will continue growing at 3%in perpetuity. Assuming an opportunity cost of capital of 5%per year, what is the present value of your future (not counting this year) projected profits? what is the present of your future projected earning including this year’s profits?

A Restaurant is open only for 25 days in a month.

Expenses for the restaurant include raw material for each sandwich at $5.00 per slice, $1,209.00 as monthly rental and $210.00 monthly as insurance. They consider the cost of lost sales as $6.00 per item. They are able to sell any leftover sandwiches for $3. They prepares 200.00 sandwiches and sells them at a rate of $13.00/sandwich.
Today there was a party at nearby office so the demand for sandwiches rose to 227.00. How much profit did the restaurant earn today?

Baxter Equipment Company - Balance Sheet for Years Ending December 31st

Note: All figures add 3 zeros ($000)

Please answer what you can. The data is too long for me to add the Income Statement, which is necessary for these questions. Since many of these questions cannot be answered without the IS, and they all pertain to the same data - this should be counted as one question.

a. What was the company's depreciation expense for 2019?

b. What were the company's current ratios for both 2018 and 2019?

c. Was the current ratio for year 2019 better or worse compared to 2018 (a one word answer please)

d. What was the company's inventory turnover for 2019?

e. What was the average collection period (2019) for their accounts receivable?

f. What was their marginal tax rate?

g. How many shares of common stock did they sell in 2019?

h. What was their EPS?

i. How much did they pay in common stock dividends?

j. What was their "TIE" (times interest earned) for 2019?

Baxter Equipment Company - Income Statement for Years Ending December 31st

Note: All figures add 3 zeros ($000)

Baxter Equipment Company - Balance Sheet for Years Ending December 31st

Note: All figures add 3 zeros ($000)

a. What was the company's depreciation expense for 2019?

b. What were the company's current ratios for both 2018 and 2019?

c. Was the current ratio for year 2019 better or worse compared to 2018 (a one word answer please)

d. What was the company's inventory turnover for 2019?

e. What was the average collection period (2019) for their accounts receivable?

f. What was their marginal tax rate?

g. How many shares of common stock did they sell in 2019?

h. What was their EPS?

i. How much did they pay in common stock dividends?

j. What was their "TIE" (times interest earned) for 2019?

One of IBM's bond issues has an annual coupon rate of 3.6%, a face value of $1,000 and matures in 9 years

What is the value of the bond if the required return is 7%?