Question

In: Accounting

The following transactions were made by Ruby Inc. last year: Issuance of common stock $100,000 Dividends...

The following transactions were made by Ruby Inc. last year:

Issuance of common stock	$100,000
Dividends paid to the company's stockholders	2,000
Depreciation expense	6,000
Repayment of principal on bonds	40,000
Proceeds from sale of the company's used equipment	39,000
Purchase of land	230,000

Based solely on the above information, net cash flow from financing activities for the year on the statement of cash flows would be:

a.($67,000).

b.($150,000).

c.$29,000.

d.$58,000.

Expert Solution

Cash Flow From Financing Activities

Issuance of Common Stock

Dividends paid to company's stockholders

Repayment of principal on bonds

100,000

(2,000)

(40,000)

Net cash flow from financing activities

$58,000

Explanations

1) Issuance of common stock is a cash inflow for the business pertaining to share capital. Share Capital forms a part of financing activity and therefore, it has been added to cash flow from financing activity.

2) Dividends are a cash outflow pertaining to the nature of shares. Therefore, it has been subtracted from cash flow from financing activity.

3) Depreciation pertains to assets. Assets do not form a part of financing activity and therefore, it has been ignored.

4) Repayment of principal on bonds is a cash outflow pertaining to long-term liabilities. Long-term liabilities form a part of financing activity and therefore, it has been subtracted from cash flow from financing activity.

5) Proceeds from sale of the company's used equipment pertains to assets. Therefore, it has been ignored

6) Purchase of land also pertains to assets and has been ignored.

Therefore, the answer is d.$58,000.

ekkarill92 answered 1 year ago

(Common stock valuation) The common stock of NCP paid $1.32 in dividends last year. Dividends are...

(Common stock valuation) The common stock of NCP paid $1.32 in dividends last year. Dividends are expected to grow at an annual rate of 8.00 percent for an indefinite number of years. a. If your required rate of return is 10.50 percent, what is the value of the stock for you? b. Should you make the investment?

The common stock of NCP paid $1.35 in dividends last year. Dividends are expected to grow...

The common stock of NCP paid $1.35 in dividends last year. Dividends are expected to grow at an annual rate of 7.90 percent for an indefinite number of years. a. If NCP's current market price is $22.93 per share, what is the stock's expected rate of return? b. If your required rate of return is 9.9 percent, what is the value of the stock for you? c. Should you make the investment?

The common stock of NCP paid ?$1.31 in dividends last year. Dividends are expected to grow...

The common stock of NCP paid ?$1.31 in dividends last year. Dividends are expected to grow at an annual rate of 7.40 percent for an indefinite number of years. a. If your required rate of return is 9.70 percent?, what is the value of the stock for? you? b. Should you make the? investment?

The common stock of NCP paid $1.25 in dividends last year. Dividends are expected to grow...

The common stock of NCP paid $1.25 in dividends last year. Dividends are expected to grow at an annual rate of 9.10 percent for an indefinite number of years. a. If NCP's current market price is $27.95 per share, the stock's expected rate of return is____%. (Round to two decimal places.) b. If your required rate of return is 11.1 percent, the value of the stock would be $ _____. (Round to the nearest cent.) c. You should (buy or...

Brille Corporation is issuing new common stock at a market price of $27. Dividends last year...

Brille Corporation is issuing new common stock at a market price of $27. Dividends last year were 1.30 and are expected to grow at an annual rate of 11 percent forever. Flotation costs will be 8 percent of market price. What is Brille's cost of equity? Brille's cost of external common equity is? %

Brille Corporation is issuing new common stock at a market price of $32. Dividends last year...

Brille Corporation is issuing new common stock at a market price of $32. Dividends last year were $1.20 and are expected to grow at an annual rate of 11 percent forever. Flotation costs will be 8 percent of market price. What is Brille's cost of equity?

Mary's Bakery has common stock with a current price of $79 and paid dividends last year...

Mary's Bakery has common stock with a current price of $79 and paid dividends last year of $2.34. Common stock floatation costs are $12.65 per share and the growth rate on common stock is 7%. The firm's preferred stock sells for $109 with a $9.50 dividend per share and floatation costs of $6.25 per share. use four decimals places in the calculation. Calculate the cost of preferred stock Calculate the cost of common stock Calculate the cost of retained earnings.

The stock of Sedly Inc. is expected to paythe following dividends. Dividends: Year 1: $2.25 year...

The stock of Sedly Inc. is expected to paythe following dividends. Dividends: Year 1: $2.25 year 2: $3.60 year 3: $1.70 . year 4: $2.00 At the end of the fourth year its value is expected to be $37.70. What should Sedly sell for today if the return on stocks of similar risk is 11.924%? Round PVF values in intermediate calcualtions to four decimal places. Round the answer to two decimal places.

Lawrence comp paid $2.00 per share in common stock dividends last year. The company will allow...

Lawrence comp paid $2.00 per share in common stock dividends last year. The company will allow its dividend to grow at 8 percent for 7 years, and after that the rate of growth will be 6 percent forever. What is the value of the stock if the required rate of return is 10 percent? the Lawrence company is subject to capital rationing and has a capital budget of $2,000,000; the firm's cost of capital is 16 percent. USE EXCEL FORMULAS...

Shamrock Corporation’s charter authorized issuance of 100,000 shares of $10 par value common stock and 53,400...

Shamrock Corporation’s charter authorized issuance of 100,000 shares of $10 par value common stock and 53,400 shares of $50 preferred stock. The following transactions involving the issuance of shares of stock were completed. Each transaction is independent of the others. 1. Issued a $9,500, 9% bond payable at par and gave as a bonus one share of preferred stock, which at that time was selling for $103 a share. 2. Issued 480 shares of common stock for equipment. The equipment...