Finance Chapter 2 2 Twenty percent of these assets are financed with debt of which

2-21

29. Corporate Taxes Swimmy, Inc. had $400,000 in 2013 taxable income. Using the tax

schedule from Table 2-3, what are the company’s 2013 income taxes, average tax rate, and

marginal tax rate, respectively?

30. Corporate Taxes Scuba, Inc. is concerned about the taxes paid by the company in 2013.

In addition to $5 million of taxable income, the firm received $80,000 of interest on state-issued

bonds and $500,000 of dividends on common stock it owns in Boating Adventures, Inc. What are

Scuba’s tax liability, average tax rate, and marginal tax rate, respectively?

31. Statement of Cash Flows Paige’s Properties Inc. reported 2013 net income of $5 million

and depreciation of $1,500,000. The top part Paige’s Properties, Inc.’s 2012 and 2013 balance

sheets is listed as follows (in millions of dollars).

What is the 2013 net cash flow from operating activities for Paige’s Properties, Inc.?

32. Statement of Cash Flows In 2013, Upper Crust had cash flows from investing activities

of ($250,000) and cash flows from financing activities of ($150,000). The balance in the firm’s

cash account was $90,000 at the beginning of 2013 and $105,000 at the end of the year. What

was Upper Crust’s cash flow from operations for 2013?

33. Statement of Cash Flows In 2013, Lower Case Productions had cash flows from

investing activities of +$50,000 and cash flows from financing activities of +$100,000. The

balance in the firm’s cash account was $80,000 at the beginning of 2013 and $65,000 at the end

of the year. What was Lower Case’s cash flow from operations for 2013?

34. Free Cash Flow You are considering an investment in Crew Cut, Inc. and want to

evaluate the firm’s free cash flow. From the income statement, you see that Crew Cut earned an

EBIT of $23 million, paid taxes of $4 million, and its depreciation expense was $8 million. Crew

Cut’s gross fixed assets increased by $10 million from 2007 to 2008. The firm’s current assets

increased by $6 million and spontaneous current liabilities increased by $4 million. What is Crew

Cut’s operating cash flow, investment in operating capital and free cash flow for 2013,

respectively in millions?

35. Free Cash Flow You are considering an investment in Cruise, Inc. and want to evaluate

the firm’s free cash flow. From the income statement, you see that Cruise earned an EBIT of

$202 million, paid taxes of $51 million, and its depreciation expense was $75 million. Cruise’s

gross fixed assets increased by $70 million from 2012 to 2013. The firm’s current assets

decreased by $10 million and spontaneous current liabilities increased by $6 million. What is

Cruise’s operating cash flow, investment in operating capital, and free cash flow for 2013,

respectively, in millions?

36. Free Cash Flow Catering Corp. reported free cash flows for 2013 of $8 million and

investment in operating capital of $2 million. Catering listed $1 million in depreciation expense

and $2 million in taxes on its 2008 income statement. What was Catering‘s 2013 EBIT?

37. Statement of Retained Earnings TriCycle, Corp. began the year 2013 with $25 million in

retained earnings. The firm earned net income of $7 million in 2008 and paid $1 million to its

preferred stockholders and $3 million to its common stockholders. What is the year-end 2013

balance in retained earnings for TriCycle?

38. Statement of Retained Earnings Night Scapes, Corp. began the year 2013 with $10

million in retained earnings. The firm suffered a net loss of $2 million in 2013 and yet paid $2

million to its preferred stockholders and $1 million to its common stockholders. What is the year–

end 2013 balance in retained earnings for Night Scapes?

39. Statement of Retained Earnings Use the following information to find dividends paid to

common stockholders during 2013.

40. Balance Sheet Harvey’s Hamburger Stand has total assets of $3 million of which $1

million are current assets. Cash makes up 20 percent of the current assets and accounts

receivable makes up another 5 percent of current assets. Harvey’s gross plant and equipment

has a book value of $1.5 million and other long-term assets have a book value of $1 million. Using

this information, what is the balance of inventory and the balance of depreciation on Harvey’s

Hamburger Stand’s balance sheet?

41. Balance Sheet School Books, Inc. has total assets of $18 million of which $6 million are

current assets. Cash makes up 10 percent of the current assets and accounts receivable makes

up another 40 percent of current assets. School Books’ gross plant and equipment has an original

cost of $13 million and other long-term assets have a cost value of $2 million. Using this

information, what are the balance of inventory and the balance of depreciation on School Books’

balance sheet?

42. Balance Sheet Ted’s Taco Shop has total assets of $5 million. Forty percent of these

assets are financed with debt of which $400,000 is current liabilities. The firm has no preferred

stock but the balance in common stock and paid-in surplus is $1 million. Using this information

what is the balance for long-term debt and retained earnings on Ted’s Taco Shop’s balance

sheet?

43. Balance Sheet Hair Etc. has total assets of $15 million. Twenty percent of these assets

are financed with debt of which $1 million is current liabilities. The firm has no preferred stock

but the balance in common stock and paid-in surplus is $8 million. Using this information what is

the balance for long-term debt and retained earnings on Hair Etc.’s balance sheet?

44. Market Value versus Book Value Acme Bricks balance sheet lists net fixed assets as

$40 million. The fixed assets could currently be sold for $50 million. Acme’s current balance sheet

shows current liabilities of $15 million and net working capital of $12 million. If all the current

accounts were liquidated today, the company would receive $77 million cash after paying $15

million in liabilities. What is the book value of Acme’s assets today? What is the market value of

these assets?

45. Market Value versus Book Value Glo’s Glasses balance sheet lists net fixed assets as

$20 million. The fixed assets could currently be sold for $25 million. Glo’s current balance sheet

shows current liabilities of $7 million and net working capital of $3 million. If all the current

accounts were liquidated today, the company would receive $9 million cash after paying $7

million in liabilities. What is the book value of Glo’s assets today? What is the market value of

these assets?

46. Market Value versus Book Value Rupert’s Rims balance sheet lists net fixed assets as

$15 million. The fixed assets could currently be sold for $17 million. Rupert’s current balance

sheet shows current liabilities of $5 million and net working capital of $3 million. If all the current

accounts were liquidated today, the company would receive $6 million cash after paying $5

million in liabilities. What is the book value of Rupert‘s assets today? What is the market value of

these assets?