Part A: Below are some of the components for Prufrock Corp. income statement for the year ending December 31st, 2016. Use the values to fill in the income statement and calculate the net income. All values are given in millions of dollars and there may be more lines provided than needed. (6 points)

 Sales = $70,000  Tax Rate = 34%  Depreciation = $16,000  Interest Paid = $450  Cost of Goods Sold = $35,000

Part B: Prufrock Corp. has 4,000 million shares outstanding. If they do not reinvest any of their earnings what will be the dividend per share paid out this year? (3 points)

Part C: Assume that the dividend from Part B will be paid out one year from today. After the initial dividend from part B is paid, the dividend is expected to grow at a rate of 4% per year. Investors require a 10% return on their investment. What is the current share price? (7 points)

The number of sick days due to colds and flu last year was recorded by a sample of 13 employees.

The data are 0, 1, 3, 5, 5, 5, 7, 8, 8, 9, 12, 13, 15 .

What is the interquartile range (IQR)?

Select one:

5

7

6

4

A company can buy a machine that is expected to have a three-year life and a $23,000 salvage value. The machine will cost $1,772,000 and is expected to produce a $193,000 after-tax net income to be received at the end of each year. If a table of present values of $1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%?

Multiple Choice

• $108,245

• $568,728

• $618,627

• $692,890

• $1,880,245
  
  

  A company is considering the purchase of a new machine for $59,000. Management predicts that the machine can produce sales of $17,100 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $6,900 per year including depreciation of $5,100 per year. Income tax expense is $4,080 per year based on a tax rate of 40%. What is the payback period for the new machine?

  Multiple Choice

• 3.45 years.

• 6.48 years.

• 5.26 years.

• 11.57 years.

• 33.91 years.

What is the present worth of a geometrically increasing series with a first year payment of $11,000 increasing at 6% per year for 25 years if the interest rate is 6% compounded annually?

A borrower borrows on a five year loan $5,000 from a bank at 10% and will pay back the loan in ten equal $ payments (semi-annually) at the end of each time period. How much is each equal payment, how much principal and interest is paid back, and how much interest is paid back?

Lessee enters into a three-year lease of equipment and concludes that the agreement is a finance lease because the lease term is for a major part of the remaining economic life of the underlying asset (also three years). In addition, Lessee pays initial direct costs of $3,000. Also, assume that Lessee has guaranteed the residual value of the equipment at the end of the lease term, has concluded that it is probable that Lessee will owe $6,000 to Lessor as a result of that residual value guarantee. The arrangement provides the following:

• Complete the following schedule to show the impact on the income statement and balance sheet.

• Prepare the journal entries at the time of the lease commencement and for Year 1 of the lease term.

Mr. Parry is a 71 year old male with a history of hypertension. He is a retired veteran who likes to spend his free time fishing and working in his garden. He presents to the clinic after a urologic follow up stating that he was recently diagnosed with BPH (Benign prostatic hypertrophy). He is relieved to finally know why he has increased urinary urgency, frequency and has been straining to pass urine over the past few years.

Discussion 6.1:

Explain the pathogenesis of BPH. Why is this disease so prevalent? Explain the physiologic mechanisms responsible for at least one of Mr. Parry’s symptoms. Does his hypertension contribute to the disease? If so, explain why.

Lee Enterprises and Jackson Distributors are considering a merger. Projections for the coming year for the companies operating independently are as follows:

Lee Enterprises:
EBIT = $200,000
Change in Working Capital = $20,000
Capital Spending = $30,000
Depreciation Expense = $20,000

Jackson Distributors:
EBIT = $450,000
Change in Working Capital = $45,000
Capital Spending = $75,000
Depreciation Expense = $50,000

Before the merger, the firms have the same cost of capital of 14% and the same expected perpetual growth rate of 4%. After the merger, the combined firms are expected to have a cost of capital of 13% and a perpetual growth rate of 5%. The tax rate for both firms is 40%.

What is the pre-merger value of the combined firms?

Select one:

A. $1,800,000

B. $2,900,000

C. $3,400,000

D. None of the above

Lessee enters into a three-year lease of equipment and concludes that the agreement is a finance lease because the lease term is for a major part of the remaining economic life of the underlying asset (also three years). In addition, Lessee pays initial direct costs of $3,000. Also, assume that Lessee has guaranteed the residual value of the equipment at the end of the lease term, has concluded that it is probable that Lessee will owe $6,000 to Lessor as a result of that residual value guarantee. The arrangement provides the following:

• Complete the following schedule to show the impact on the income statement and balance sheet.

• Prepare the journal entries at the time of the lease commencement and for Year 1 of the lease term.