Financial Management A1

1．A firm has net working capital of $640. Long-term debt is $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities?

Current liabilities: 6230-3910-640=1680

Total liabilities: 1680+4180=5860

2. Kaylor Equipment Rental paid $75 in dividends and $511 in interest expense. The addition to retained earnings is $418 and net new equity is $500. The tax rate is 35 percent. Sales are $15,900 and depreciation is $680. What are the earnings before interest and taxes?

75+418/ (1-0.35) =758

Earnings before interest and taxes= 758+511= 1269

3. Winston Industries had sales of $843,800 and costs of $609,900. The firm paid $38,200 in interest and $18,000 in dividends. It also increased retained earnings by $62,138 for the year. The depreciation was $76,400. What is the average tax rate?

18000+62138= 80138

843800-609900-38200-76400= 119300

Tax rate: (119300-80138) /119300= 0.3283

4. Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 32 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?

546000-295000-37000-15000= 199000

After tax: 199000*(1-0.32) = 135320

Retained earnings: 135320-59000= 76320

5. Dee Dee's Marina is obligated to pay its creditors $6,400 today. The firm's assets have a current market value of $5,900. What is the current market value of the shareholders' equity?

Equity=5900-6400= -500

6. Which one of the following will produce the highest present value interest factor?

A. 6 percent interest for five years

B. 6 percent interest for eight years

C. 6 percent interest for ten years

D. 8 percent interest for five years

E. 8 percent interest for ten years

PV=FV/ (1+Rate)t, so the answer is A.

7. You invested $1,400 in an account that pays 5 percent simple interest. How much more could you have earned over a 20-year period if the interest had compounded annually?...