Individual Assignment

Chapter 3 Financial Statements, Cash Flow and Taxes

Chapter 4 Analysis of Financial Statements

MBA Managerial Finance

Thomas White

Presented By:

Tammi Livers

September 1, 2010

Chapter 3 Problems

(3-1) An investor recently purchased a corporate bond which yields 9%. The investor is in the 36% combined federal and state tax bracket. What is the bond’s after-tax yield.

5.8%

(3-2)

Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds?

25%

(3-3)

Little Books Inc. recently reported $3 million on net income. Its EBIT was $6 million, and its tax rate was 40%. What was its interest expense? [Hint: Write out the headings for an income statement and then fill in the known values. Then divide $3 million net income by (1 – T) = .6 to find the pre-tax income. The difference between EBIT and taxable income must be the interest expense. Use this same procedure to work some of the other problems.]

$1,000,000.

(3-6)

In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends was paid to shareholders during the year?

$20,000,000.

Chapter 4 Problems

(4-1)

Green Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.

A/R = 400,000

(4-2)

Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio?

D/A = 60%

(4-4)

A company has a EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio?

P/E = 16.0

(4-5)

Needham Pharmaceuticals...