McGraw Hill Connect BUS 530 Finance Week 2, full homework, 25 problems with fully worked solutions, work shown. Text: Fundamentals of Corporate Finance, Brealy, 7th edition You have set up your tax preparation firm as an incorporated business. You took $77,500 from the firm as your salary. The firms taxable income for the year (net of your salary) was $15,000. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3-5 and Table 3-7 . a. How much taxes must be paid to the federal government, including both your personal taxes and the firms taxes? By how much will you reduce the total tax bill by reducing your salary to $57,500, thereby leaving the firm with taxable income of $35,000? The year-end 2010 balance sheet of Brandex Inc. listed common stock and other paid-in capital at $2,600,000 and retained earnings at $4,900,000. The next year, retained earnings were listed at $5,200,000. The firms net income in 2011 was $1,050,000. There were no stock repurchases during the year. What were the dividends paid by the firm in 2011? Construct a balance sheet for Sophies Sofas given the following data. (Be sure to list the assets and liabilities in order of their liquidity.) Cash balances = $ 5,000 Inventory of sofas = $ 150,000 Store and property = $ 50,000 Accounts receivable = $ 17,000 Accounts payable = $ 12,000 Long-term debt = $ 120,000 The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $100,000 in setting up a production plant. He believes that he could sell his patent for $24 million. a. What are the book value and market value of the firm? (Enter your answers in dollars not in millions.) b. If there are 1 million shares of stock in the new corporation, what would be the price per share and the book value per share? (Round your answers to 2 decimal places.) Sheryls Shipping had sales last year of $13,500. The cost of goods sold was $7,200, general and administrative expenses were $1,700, interest expenses were $1,200, and depreciation was $1,700. The firms tax rate is 30%. a.What are earnings before interest and taxes?b. what is net income? c. What is cash flows from operations? Ponzi Products produced 118 chain letter kits this quarter, resulting in a total cash outlay of $10 per unit. It will sell 59 of the kits next quarter at a price of $11, and the other 59 kits in two quarters at a price of $12. It takes a full quarter for it to collect its bills from its customers. (Ignore possible sales in earlier or later quarters and assume all positive cash flow is distributed as expenses or earnings to shareholders.) a. Prepare an income statement for Ponzi for today and for each of the next three quarters. Ignore taxes. (Leave no cells blank – be certain to enter “0” wherever required.) What are the cash flows for the company today and in each of the next three quarters? What is Ponzis net working capital in each quarter? During the last year of operations, accounts receivable increased by $10,900, accounts payable increased by $5,900, and inventories decreased by $2,900. What is the total impact of these changes on the difference between profits and cash flow? b. What would happen to net income and cash flow if depreciation were increased by $2.30 million? (Input all amounts as positive values. Enter your answers in millions rounded to 2 decimal places.) Butterfly Tractors had $20.50 million in sales last year. Cost of goods sold was $9.30 million, depreciation expense was $3.30 million, interest payment on outstanding debt was $2.30 million, and the firms tax rate was 30%. a. What was the firms net income and net cash flow? (Enter your answers in millions rounded to 2 decimal places.) d. What would be the impact on net income and cash flow if the firms interest expense were $2.30 million higher. (Input all amounts as positive values. Enter your answers in millions rou…
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