Question Details

C. F. Lee Inc. has the following income statement 


1. C. F. Lee Inc. has the following income statement .  How much after-tax operating income does the firm have ?
	Sales	$2,850.00
	Costs	1,850.00
	Depreciation	   192.00
	EBIT	$  808.00
	Interest expense	   285.00
	EBT	$  523.00
	Taxes (35%)	   183.05
	Net income	$  339.95
a.$427.78     b. $450.29     c.$473.99      d. $498.94     e. $525.20
2. Hartzell Inc. had the following data for 2007, in millions:  after-tax operating income [EBIT (1-T)] = $400; and cumulative depreciation = 
$200.  Information for 2008 is as follows:  after-tax operating income [EBIT (1-T)] = $466; and cumulative depreciation = $210.  How much
 free cash flow did the firm generate during 2008 if there is no change in capital expenditure and net working capital?
a. $383       b. $425       c. $476       d. $514       e. $676

3. Moose Industries faces the following tax schedule:					          Percentage on
	Taxable Income			Tax Base of Bracket		Excess above Base
Up to $50,000	$0	15%
$50,000-$75,000	7,500	25
$75,000-$100,000	13,750	34
$100,000-$335,000	22,250	39
Last year the company realized $500,000 in operating income (EBIT). Its annual interest expense is $200,000.  What was the company- net income for the year?
a.  $9,874     b. $63,025     c.  $199,750    d. $560,000     e. $890,500

4. A firm wants to strengthen its financial position.  Which of the following actions would increase its quick ratio ?
a.	Offer price reductions along with generous credit terms that would (1) enable the firm to sell some of its excess inventory and (2) lead to an increase in accounts receivable.
b.	Issue new common stock and use the proceeds to increase inventories.
c.	Speed up the collection of receivables and use the cash generated to increase inventories.
d.	Use some of its cash to purchase additional inventories.
e.	Issue new common stock and use the proceeds to acquire additional fixed assets.	
5. Cook, Inc. has a current ratio of 1.8x on current liabilities of $200,000. The firm has $36,000 of inventories. Cook, Inc is considering an expansion which would require a rapid increase in its inventories. The firm will issue notes payable and use those funds to buy new inventories to meet the inventory requirement for the expansion. Cook- debt holders specifies that it must maintain a quick ratio at least 1.20x, or else it may default. How much new inventory can Cook raise before it violates its bond contracts?
a.  $70,000        b.  $80,000        c.  $90,000        d.  72,000        e.  $30,000



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