Question

In: Finance

A. A store has sales of $421,000 with costs of $342,000. Interest expense is $18,000 and...

A. A store has sales of $421,000 with costs of $342,000. Interest expense is $18,000 and depreciation is $33,000. The tax rate is 34 percent. what is the net income?

B. what is the price of a bond that pays annual coupons with a coupon rate 4.5%, has a face value of $1,000, matures in 11 years and has a yield to maturity of 10%?

C. A firm has total debt of $4,850 and a debt-assets ratio of 0.5. What is the value of the total assets?

Expert Solution

Solution A :

The formula for calculating Net Income is

= ( Sales – Costs – Interest Expense – Depreciation ) * ( 1 – Tax rate )

As per the information available in the question we have

Sales = $ 421,000 ; Costs = $ 342,000 ; Interest Expense = $ 18,000 ; Depreciation = $ 33,000 ;

Tax rate = 34 % = 0.34

Applying the above information in the formula we have net income as

= ( $ 421,000 - $ 342,000 - $ 18,000 - $ 33,000 ) * ( 1 – 0.34 )

= $ 28,000 * 0.66

= $ 18,480

Thus the Net Income of the store is = $ 18,480

Solution C:

The formula for calculating the debt – assets Ratio is

Debt – Assets Ratio = Total Debt / Total Assets

As per the information available in the question we have

Debt – Assets Ratio = 0.5 ; Total Debt = $ 4,850 ; Total assets = To find

Applying the above information in the formula we have

0.5 = $ 4,850 / Total Assets

0.5 * Total Assets = $ 4,850

Total Assets = $ 4,850 / 0.5

Total Assets = $ 9,700

Thus the Total Assets = 9,700

Solution B:

The price of the bond = $ 642.77

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 2 years ago

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