Question Details

How much after-tax operating income does the firm have 



1. Prezas Company's balance sheet showed total current assets of $4,250, all of which were required in operations.  Its current liabilities consisted of $975 of accounts payable, $600 of 6% short-term notes payable to the bank, and $250 of accrued wages and taxes.  What was its net operating working capital?

a.	$2,874
b.	$3,025 
c.	$3,176
d.	$3,335


2. Rao Construction recently reported $20.50 million of sales, $12.60 million of operating costs other than depreciation, and $3.00 million of depreciation.  It had $8.50 million of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%.  What was Rao's operating income, or EBIT, in millions?

a.	$3.21
b.	$3.57
c.	$3.97
d.	$4.90  


3. Over the years, O'Brien Corporation's stockholders have provided $20,000,000 of capital, when they purchased new issues of stock and allowed management to retain some of the firm's earnings.  The firm now has 1,000,000 shares of common stock outstanding, and it sells at a price of $38.50 per share.  How much value has O'Brien's management added to stockholder wealth over the years, i.e., what is O'Brien's MVA?

a.	$18,500,000  
b.	$18,870,000
c.	$19,247,400
d.	$19,632,348



4. Your corporation has the following cash flows:

	Operating income	$250,000
	Interest received	$ 10,000
	Interest paid	$ 45,000
	Dividends received	$ 20,000
	Dividends paid	$ 50,000

If the applicable income tax rate is 40% (federal and state combined), and if 70% of dividends received are exempt from taxes, what is the corporation's tax liability?

a.	$ 83,980
b.	$ 88,400 
c.	$ 92,820
d.	$ 97,461



5. Kwok Enterprises has the following income statement.  How much after-tax operating income does the firm have?

	Sales	$2,250
	Costs	1,400
	Depreciation	   250
	EBIT	$  600
	Interest expense	    70
	EBT	$  530
	Taxes (40%)	   212
	Net income	$  318

a.	$325
b.	$342
c.	$360  
d.	$378




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