a.
The company had high depreciation expenses.
b.
The company repurchased some of its common stock.
c.
The company dramatically increased its capital expenditures.
d.
The company retired a large amount of its long-term debt.
e.
The company sold some of its fixed assets.
54. Tucker Electronic System’s current balance sheet shows total common equity of $3,125,000. The
company has 125,000 shares of stock outstanding, and they sell at a price of $52.50 per share. By how
much do the firm’s market and book values per share differ?
a.
$27.50
b.
$28.88
c.
$30.32
d.
$31.83
e.
$33.43
55. Hunter Manufacturing Inc.’s December 31, 2012, balance sheet showed total common equity of
$2,050,000 and 100,000 shares of stock outstanding. During 2013, Hunter had $250,000 of net
income, and it paid out $100,000 as dividends. What was the book value per share at 12/31/13,
assuming that Hunter neither issued nor retired any common stock during 2013?
a.
$20.90
b.
$22.00
c.
$23.10
d.
$24.26
e.
$25.47
56. Companies generate income from their “regular” operations and from other sources like interest earned
on the securities they hold, which is called non-operating income. Lindley Textiles recently reported
$12,500 of sales, $7,250 of operating costs other than depreciation, and $1,000 of depreciation. The
company had no amortization charges and no non-operating income. It had $8,000 of bonds
outstanding that carry a 7.5% interest rate, and its federal-plus-state income tax rate was 40%. How
much was Lindley’s operating income, or EBIT?
a.
$3,462
b.
$3,644
c.
$3,836
d.
$4,038
e.
$4,250
57. Frederickson Office Supplies recently reported $12,500 of sales, $7,250 of operating costs other than
depreciation, and $1,250 of depreciation. The company had no amortization charges and no non–
operating income. It had $8,000 of bonds outstanding that carry a 7.5% interest rate, and its federal–
plus-state income tax rate was 40%. How much was the firm’s taxable income, or earnings before taxes
(EBT)?
a.
$3,230.00
b.
$3,400.00
c.
$3,570.00
d.
$3,748.50
e.
$3,935.93
58. JBS Inc. recently reported net income of $4,750 and depreciation of $885. How much was its net cash
flow, assuming it had no amortization expense and sold none of its fixed assets?
a.
$4,831.31
b.
$5,085.59
c.
$5,353.25
d.
$5,635.00
e.
$5,916.75
59. Swinnerton Clothing Company’s balance sheet showed total current assets of $2,250, all of which were
required in operations. Its current liabilities consisted of $575 of accounts payable, $300 of 6% short-
term notes payable to the bank, and $145 of accrued wages and taxes. What was its net operating
working capital that was financed by investors?
a.
$1,454
b.
$1,530
c.
$1,607
d.
$1,687
e.
$1,771
60. Over the years, Janjigian Corporation’s stockholders have provided $15,250 of capital, part when they
purchased new issues of stock and part when they allowed management to retain some of the firm’s
earnings. The firm now has 1,000 shares of common stock outstanding, and it sells at a price of $42.00
per share. How much value has Janjigian’s management added to stockholder wealth over the years,
i.e., what is Janjigian’s MVA?
a.
$21,788
b.
$22,935
c.
$24,142
d.
$25,413
e.
$26,750
61. Meric Mining Inc. recently reported $15,000 of sales, $7,500 of operating costs other than
depreciation, and $1,200 of depreciation. The company had no amortization charges, it had
outstanding $6,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate
was 35%. How much was the firm’s net income after taxes? Meric uses the same depreciation expense
for tax and stockholder reporting purposes.
a.
$3,284.55
b.
$3,457.42
c.
$3,639.39
d.
$3,830.94
e.
$4,022.48
62. On 12/31/2013, Heaton Industries Inc. reported retained earnings of $675,000 on its balance sheet, and
it reported that it had $172,500 of net income during the year. On its previous balance sheet, at
12/31/2012, the company had reported $555,000 of retained earnings. No shares were repurchased
during 2013. How much in dividends did Heaton pay during 2013?
a.
$47,381
b.
$49,875
c.
$52,500
d.
$55,125
e.
$57,881
63. Ullrich Printing Inc. paid out $21,750 of common dividends during the year. It ended the year with
$187,500 of retained earnings versus the prior year’s retained earnings of $132,250. How much net
income did the firm earn during the year?
a.
$77,000
b.
$80,850
c.
$84,893
d.
$89,137
e.
$93,594
64. NNR Inc.’s balance sheet showed total current assets of $1,875,000 plus $4,225,000 of net fixed assets.
All of these assets were required in operations. The firm’s current liabilities consisted of $475,000 of
accounts payable, $375,000 of 6% short-term notes payable to the bank, and $150,000 of accrued
wages and taxes. Its remaining capital consisted of long-term debt and common equity. What was
NNR’s total investor-provided operating capital?
a.
$4,694,128
b.
$4,941,188
c.
$5,201,250
d.
$5,475,000
e.
$5,748,750
65. Last year Tiemann Technologies reported $10,500 of sales, $6,250 of operating costs other than
depreciation, and $1,300 of depreciation. The company had no amortization charges, it had $5,000 of
bonds that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 35%. This year’s
data are expected to remain unchanged except for one item, depreciation, which is expected to increase
by $750. By how much will net after-tax income change as a result of the change in depreciation? The
company uses the same depreciation calculations for tax and stockholder reporting purposes.
a.
−463.13
b.
−487.50
c.
−511.88
d.
−537.47
e.
−564.34
66. TSW Inc. had the following data for last year: Net income = $800; Net operating profit after taxes
(NOPAT) = $700; Total assets = $3,000; and Total operating capital = $2,000. Information for the
just-completed year is as follows: Net income = $1,000; Net operating profit after taxes (NOPAT) =
$925; Total assets = $2,600; and Total operating capital = $2,500. How much free cash flow did the
firm generate during the just-completed year?
a.
$383
b.
$425
c.
$468
d.
$514
e.
$566
67. Rao Corporation has the following balance sheet. How much net operating working capital does the
firm have?
Cash
$ 10
Accounts payable
$ 20
Short-term investments
Accruals
20
Accounts receivable
50
Notes payable
50
Inventory
40
Current liabilities
$ 90
Current assets
$130
Long-term debt
0
Net fixed assets
100
Common equity
30
Retained earnings
50
Total assets
$230
Total liab. & equity
$230
a.
$54.00
b.
$60.00
c.
$66.00
d.
$72.60
e.
$79.86
68. Bae Inc. has the following income statement. How much net operating profit after taxes (NOPAT)
does the firm have?
Sales
$2,000.00
NOPAT = EBIT(1 − T)
Total operating capital
Costs
1,200.00
Depreciation
100.00
EBIT
$ 700.00
Interest expense
200.00
EBT
$ 500.00
Taxes (35%)
175.00
Net income
$ 325.00
a.
$370.60
b.
$390.11
c.
$410.64
d.
$432.25
e.
$455.00
69. EP Enterprises has the following income statement. How much net operating profit after taxes
(NOPAT) does the firm have?
Sales
$1,800.00
Costs
1,400.00
Depreciation
250.00
EBIT
$ 150.00
Interest expense
70.00
EBT
$ 80.00
Taxes (40%)
32.00
Net income
$ 48.00
a.
$81.23
b.
$85.50
c.
$90.00
d.
$94.50
e.
$99.23
EBIT
Tax rate
NOPAT =
EBIT
Tax rate
NOPAT =
70. Tibbs Inc. had the following data for the year ending 12/31/12: Net income = $300; Net operating
profit after taxes (NOPAT) = $400; Total assets = $2,500; Short-term investments = $200;
Stockholders’ equity = $1,800; Total debt = $700; and Total operating capital = $2,300. What was its
return on invested capital (ROIC)?
a.
14.91%
b.
15.70%
c.
16.52%
d.
17.39%
e.
18.26%
NOPAT
Total operating capital
71. Zumbahlen Inc. has the following balance sheet. How much total operating capital does the firm have?
Cash
$ 20.00
Accounts payable
$ 30.00
Short-term investments
50.00
Accruals
50.00
Accounts receivable
20.00
Notes payable
30.00
Inventory
60.00
Current liabilities
$110.00
Current assets
$150.00
Long-term debt
70.00
Gross fixed assets
$140.00
Common stock
30.00
Accumulated deprec.
40.00
Retained earnings
40.00
Net fixed assets
$100.00
Total common equity
$ 70.00
Total assets
$250.00
Total liab. & equity
$250.00
a.
$114.00
b.
$120.00
c.
$126.00
d.
$132.30
e.
$138.92
72. Barnes’ Brothers has the following data for the year ending 12/31/12: Net income = $600; Net
operating profit after taxes (NOPAT) = $700; Total assets = $2,500; Short-term investments = $200;
Stockholders’ equity = $1,800; Total debt = $700; and Total operating capital = $2,100. Barnes’
weighted average cost of capital is 10%. What is its economic value added (EVA)?
a.
$399.11
b.
$420.11
c.
$442.23
d.
$465.50
e.
$490.00
73. Edwards Electronics recently reported $11,250 of sales, $5,500 of operating costs other than
depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of
bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 35%. How much
was its net cash flow?
a.
$3,284.75
b.
$3,457.63
c.
$3,639.61
d.
$3,831.17
e.
$4,032.81
74. Wells Water Systems recently reported $8,250 of sales, $4,500 of operating costs other than
depreciation, and $950 of depreciation. The company had no amortization charges, it had $3,250 of
outstanding bonds that carry a 6.75% interest rate, and its federal-plus-state income tax rate was 35%.
In order to sustain its operations and thus generate sales and cash flows in the future, the firm was
required to spend $750 to buy new fixed assets and to invest $250 in net operating working capital.
How much free cash flow did Wells generate?
a.
$1,770.00
b.
$1,858.50
c.
$1,951.43
d.
$2,049.00
e.
$2,151.45
75. HHH Inc. reported $12,500 of sales and $7,025 of operating costs (including depreciation). The
company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of
that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%. What was
HHH’s Economic Value Added (EVA), i.e., how much value did management add to stockholders’
wealth during the year?
a.
$1,357.13
b.
$1,428.56
c.
$1,503.75
d.
$1,578.94
e.
$1,657.88
76. Last year, Michelson Manufacturing reported $10,250 of sales, $3,500 of operating costs other than
depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of
bonds outstanding that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 35%.
This year’s data are expected to remain unchanged except for one item, depreciation, which is expected
to increase by $725. By how much will the depreciation change cause the firm‘s net after-tax income
and its net cash flow to change? Note that the company uses the same depreciation calculations for tax
and stockholder reporting purposes.
a.
−$383.84; $206.68
b.
−$404.04; $217.56
c.
−$425.30; $229.01
d.
−$447.69; $241.06
e.
−$471.25; $253.75
77. Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than
depreciation, and $700 of depreciation. The company had no amortization charges, it had $3,200 of
outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In
order to sustain its operations and thus generate sales and cash flows in the future, the firm was
required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net
operating working capital. By how much did the firm’s net income exceed its free cash flow?
a.
$673.27
b.
$708.70
c.
$746.00
d.
$783.30
e.
$822.47
