Sand Technologies: Income Statements for Year Ending December 31           
(in thousands)           2019   2018  
Sales               $945,000   $880,000  
Expenses excluding depreciation and amortization   822,150   730,400  
EBITDA               $122,850   $149,600  
Depreciation and amortization       32,400   31,500  
EBIT               $90,450   $118,100  
Interest Expense           10,470   8,600  
EBT               $79,980   $109,500  
Taxes (40%)               31,992   43,800  
Net income           $47,988   $65,700  
                      
Common dividends           $38,050   $55,390  
Addition to retained earnings       $9,938   $10,310  
                      
Sand Technologies: December 31 Balance Sheets          
(in thousands)                  
Assets               2019   2018  
Cash and cash equivalents       $53,400   $44,685  
Short-term investments           8,500   12,450  
Accounts Receivable           283,500   275,880  
Inventories               141,750   135,000  
Total current assets           $487,150   $468,015  
Net fixed assets           425,600   401,400  
Total assets               $912,750   $869,415  
                      
Liabilities and equity                  
Accounts payable           $94,500   $90,000  
Accruals               46,850   42,750  
Notes payable           32,362   54,565  
Total current liabilities           $173,712   $187,315  
Long-term debt           194,500   147,500  
Total liabilities           $368,212   $334,815  
Common Stock           444,600   444,600  
Retained Earnings           99,938   90,000  
Total common equity           $544,538   $534,600  
Total liabilities and equity           $912,750   $869,415  
                      
Key Input Data                  
Tax rate               40%      
                      
NAME:      SECTION:   FALL 2020  
                      
Net operating working capital -- NOWC              
2019   NOWC =    Operating current assets   -   Operating current liabilities      
2019   NOWC =       -         
2019   NOWC =                  
                      
2018   NOWC =    Operating current assets   -   Operating current liabilities      
2018   NOWC =       -         
2018   NOWC =                  
                      
Total net operating capital -- OC              
2019   OC =    NOWC   +   Net Fixed assets      
2019   OC =       +         
2019   OC =                  
                      
2018   OC =    NOWC   +   Net Fixed assets      
2018   OC =       +         
2018   OC =                  
                      
                      
Net operating profit after taxes              
2019   NOPAT =    EBIT   x   ( 1 - Tax rate )      
2019   NOPAT =       x         
2019   NOPAT =                  
                      
Operating Cash Flow (OCF)               
2019   OCF=   NOPAT   +   Depreciation      
2019   OCF=      +         
2019   OCF=                 
                      
Free cash flow                  
2019   FCF =    NOPAT   -   Net investment in operating capital  
2019   FCF =       -         
2019   FCF =                  
                      
Return on invested capital                  
2019   ROIC =    NOPAT   /   Total net operating capital -- 2019 OC  
2019   ROIC =       /         
2019   ROIC =                  
                      
Assume that there were 15 million shares outstanding at the end of the year, the year-end closing stock price was $48.50 per share, and the after-tax cost of capital was 6%. Calculate EVA and MVA for the most recent year.

                      
Additional Input Data                  
Stock price per share   $48.50              
# of shares (in thousands)   15,000              
After-tax cost of capital   6.0%              
                      
Market Value Added                  
MVA =    Stock Price   x   # of shares   -   2019 Total common equity
      x             
              -     
MVA =                      
                      
Economic Value Added                  
EVA =    NOPAT   -   (Operating Capital -- 2019 OC   x   After-tax cost of capital -- WACC)
       -      x     
      -             
EVA =                      

At the beginning of the year, Grouper Ltd. had 910 units with a cost of $5 per unit in its beginning inventory. The following inventory transactions occurred during the month of January:

Prepare journal entries for these January transactions assuming that Grouper Ltd. uses FIFO under a periodic inventory system. Grouper updates records at month end.

The equity sections for Atticus Group at the beginning of the year (January 1) and end of the year (December 31) follow. Stockholders’ Equity (January 1) Common stock—$5 par value, 100,000 shares authorized, 30,000 shares issued and outstanding $ 150,000 Paid-in capital in excess of par value, common stock 110,000 Retained earnings 340,000 Total stockholders’ equity $ 600,000 Stockholders’ Equity (December 31) Common stock—$5 par value, 100,000 shares authorized, 35,000 shares issued, 5,000 shares in treasury $ 175,000 Paid-in capital in excess of par value, common stock 155,000 Retained earnings ($40,000 restricted by treasury stock) 400,000 730,000 Less cost of treasury stock (40,000 ) Total stockholders’ equity $ 690,000 The following transactions and events affected its equity during the year. Jan. 5 Declared a $0.40 per share cash dividend, date of record January 10. Mar. 20 Purchased treasury stock for cash. Apr. 5 Declared a $0.40 per share cash dividend, date of record April 10. July 5 Declared a $0.40 per share cash dividend, date of record July 10. July 31 Declared a 20% stock dividend when the stock’s market value was $14 per share. Aug. 14 Issued the stock dividend that was declared on July 31. Oct. 5 Declared a $0.40 per share cash dividend, date of record October 10. Required: 1. How many common shares are outstanding on each cash dividend date? What is the total dollar amount for each of the four cash dividends? What is the amount of retained earnings transferred to paid-in capital accounts (capitalized) for the stock dividend? What is the per share cost of the treasury stock purchased? (Round your answer to 2 decimal places.) How much net income did the company earn this year?

What is the duration of a 4 year coupon bond with a face value of $1000, a coupon rate of 8% and interest rate is 10%?

A) 3.12

B) 3.56

C) 3.48

D) 3. 89

The records of Boomer Corp, in its first year of operations, at the end of 20X8, provided the following data related to income taxes.

a. Golf club dues expense in 20X8, $10,000, properly recorded for accounting purposes but not tax deductible at any time

b. Investment revenue in 20X8, $325,000, properly recorded for accounting purposes, but not taxable at any time.

c. Estimated expense for warranty costs, $70,000; accrued for accounting purposes at the end of 20X8; to be reported for income tax purposes when paid. There were no warranty cost incurred in 20X8

d. Gain on disposal of land, $240,000; recorded for accounting purposes at the end of 20X8; to be reported as a capital gain for income tax purposes when collected at the end of 20X10

e. Costs incurred for development costs, $50,000; deducted for income tax purposes; recognized for accounting purposes as depreciated. There was no depreciation of development costs in 20X8

f. Equipment purchase in 20X8, $1,500,000; depreciation $100,000 recorded for accounting purposes in 20X8; CCA of $150,000 was deducted for income tax purposes in 20X8

Accounting earnings (from the SCI) for 20X8 was $1,200,000; the income tax rate is 38%. There were no deferred tax amounts as of the beginning 20X8

Required:

1. Are the individual differences listed above permanent differences or temporary differences? Explain why.

2. Calculate Taxable Income and Tax payable.

3. Prepare the journal entry to record income tax at the end of 20X8

New lithographic equipment, acquired at a cost of $800,000 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $90,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected.

In the first week of the fifth year, the equipment was sold for $134,570.

Required:

1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by the following methods:

a. Straight-line method

b. Double-declining-balance method

Todd’s Turtles is expected to increase dividends by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. The last dividend was $1, the required return is 12%, what is the current price of the stock? A. $6.90 B. $8.67 C. $10.10 D. $13.72 E. $13.04

thanks

1.      A company anticipates a depreciation deduction of $70,000 in year 4 of a project. The company's tax rate is 40% and its discount rate is 12%. The present value of the depreciation tax shield resulting from this deduction is closest to:

          A)     $17,808

          B)     $29,000

          C)     $21,000

          D)     $13,356

2.      (Ignore income taxes in this problem.) Nevland Corporation is considering the purchase of a machine that would cost $120,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $18,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $43,000. The company requires a minimum pretax return of 19% on all investment projects. The net present value of the proposed project is closest to:

          A)     $32,966

          B)     $26,376

          C)     $64,902

          D)     $30,040

3.      (Ignore income taxes in this problem) The management of Elamin Corporation is considering the purchase of a machine that would cost $305,745 and would have a useful life of 9 years. The machine would have no salvage value. The machine would reduce labor and other operating costs by $51,000 per year. The internal rate of return on the investment in the new machine is closest to:

          A)     9%

          B)     11%

          C)     12%

          D)     10%

4.      (Ignore income taxes in this problem.) The management of Solar Corporation is considering the following three investment projects:

          Rank the projects according to the profitability index, from most profitable to least profitable.

          A)     M,N,L

          B)     L,N,M

          C)     N,L,M

          D)     N,M,L

5.      (Ignore income taxes in this problem.) The management of Lanzilotta Corporation is considering a project that would require an investment of $368,600 and would last for 8 years. The annual net operating income from the project would be $66,000, which includes depreciation of $31,000. The scrap value of the project's assets at the end of the project would be $15,000. The payback period of the project is closest to:

          A)     3.8 years

          B)     2.6 years

          C)     2.7 years

          D)     4.0 years

6.      Dunn Construction, Inc., has a large crane that cost $35,000 when purchased ten years ago. Depreciation taken to date totals $25,000. The crane can be sold now for $8,000. Assuming a tax rate of 40%, if the crane is sold the total after-tax cash inflow for capital budgeting purposes will be:

          A)     $7,400

          B)     $10,000

          C)     $8,800

          D)     $8,000

The price today of a European put option that matures in one year and has a strike price of $70 is $7. The underlying stock price today is $71. A dividend of $1.50 is expected in four months and another dividend of $1.50 is expected in eight months. The continuously compounded risk free rate of interest is 4% per annum for all maturities. Using put-call parity:

1. a) ComputethepricetodayofaEuropeancalloptionwhichmaturesinoneyearandhasa strike price of $70.

2. b) Compute the price difference today between a put and a call on the stock, when both options mature in one year, are European, and have a strike price of $75.