Question Details

Which of the following conditions would cause the AFN to increase



1.	Which of the following items is NOT normally considered to be a current asset?
a.	Accounts receivable.
b.	Inventory.
c.	Bonds.
d.	Cash.
e.	Short-term, highly-liquid, marketable securities.
2. 	The following information for Towsontown, Inc. is provided:
Net Sales:		$88,000
Operating Costs:		$72,000 (doesn’t include depreciation)
Depreciation Expense:	$  7,200 (no amortization charges occurred)
Debt:			$40,000
Interest Rates:		10% Annual
Tax Rate:			34%
How much net cash flow did Woodley generate over the past year?
a.     $3,168        
b.     $3,268        
c.     $10,168        
d.     $10,368        
e.     $11,368
3.	Houston Pumps recently reported $185,250 of sales, $140,500 of operating costs other than depreciation, and $9,250 of depreciation.  The company had $35,250 of outstanding bonds that carry a 6.75% interest rate, and its income tax rate was 35%.  In order to sustain its operations and thus generate future sales and cash flows, the firm was required to spend $15,250 to buy new capital expenditure and to invest $6,850 in net working capital.  What was the firm's free cash flow?
a.	$10,225
b.	$10,736
c.	$11,273
d.	$11,837
e.	$12,429
	4.	Corporations face the following tax schedule:
	Tax on Base	Percentage on
	Taxable Income			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

Company Z has $80,000 of taxable income from its operations, $5,000 of interest income, and $30,000 of dividend income from preferred stock it holds in other corporations.  What is Company Z- tax liability (For dividend, 70% is excluded from the taxable income. Taxable income for dividend is Dividend income*(1 - Dividend exclusion %))?
a.	$17,328
b.	$18,240
c.	$19,200
d.	$20,210
e.	$21,221
	5.	A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise.  Which of the following conditions would cause the AFN to increase?
a.	The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.
b.	The company increases its dividend payout ratio.
c.	The company begins to pay employees monthly rather than weekly.
d.	The company- profit margin increases.
e.	The company decides to stop taking discounts on purchased materials.




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