Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 2, Problem 19QP
Net Income and OCF [LO2] During 2014, Raines Umbrella Corp. had sales of $675,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $435,000, $85,000, and $125,000, respectively. In addition, the company had an interest expense of $70,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.)
a. What is Raines’s net income for 2014?
b. What is its operating cash flow?
c. Explain your results in (a) and (b).
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Net Income and OCF [LO2] During 2009, Raines Umbrella Corp. had sales of
S730,000. Cost of goods sold, administrative and selling expenses, and depreciation
expenses were $580,000, $105,000, and S135.000, respectively. In addition, the
company had an interest expense of $75,000 and a tax rate of 35 percent. (Ignore
any tax loss carryback or carryforward provisions.)
a. What is Raines's net income for 2009?
b. What is its operating cash flow?
c. Explain your results in (a) and (b).
Accounting Values versus Cash Flows (L04 In Problem 19, supposc Raines
Umbrella Corp, paid out $25,000 in cash dividends. Is this possible? If spending on
net fixed asseIs and net working capital was zero, and if no new stock was issued
during the year, what do you know about the firm's long-term debt account?
Use the following information for Ingersoll, Inc., (assume the tax rate is 35 percent):
2015
2014
$9,335 $9,909
Sales
Depreciation
Cost of goods sold
Other expenses
Interest
Cash
Accounts receivable
Short-term notes
payable
Long-term debt
Net fixed assets
Accounts payable
Inventory
Dividends
1,275
2,846
789
675
4,259
5,589
944
1,276
3,210
684
753
15,110
35,955 37,077
Cash flow from assets
Cash flow to creditors
Cash flow to stockholders
5,353
6,277
896
17,550
4,616 4,335
10,088
9,820
1,106
1,201
For 2015, calculate the cash flow from assets, cash flow to creditors, and cash flow to
stockholders. (Do not round intermediate calculations. A negative answer should be
indicated by a minus sign. Round your answers to 2 decimal places, e.g., 32.16.)
$
$
$
Fusion Energy Co’s earnings before interest and taxes (EBIT) was $275 million.
Assuming Fusion Energy’s tax rate is 25%, what is their net operating profit after taxes (NOPAT) for 2015 expressed in millions of dollars
Chapter 2 Solutions
Fundamentals of Corporate Finance
Ch. 2.1 - Prob. 2.1ACQCh. 2.1 - What is liquidity? Why is it important?Ch. 2.1 - What do we mean by financial leverage?Ch. 2.1 - Explain the difference between accounting value...Ch. 2.2 - What is the income statement equation?Ch. 2.2 - Prob. 2.2BCQCh. 2.2 - Why is accounting income not the same as cash...Ch. 2.3 - What is the difference between a marginal and an...Ch. 2.3 - Do the wealthiest corporations receive a tax break...Ch. 2.4 - Prob. 2.4ACQ
Ch. 2.4 - Prob. 2.4BCQCh. 2.4 - Why is interest paid not a component of operating...Ch. 2 - What types of accounts are the most liquid?Ch. 2 - What is an example of a noncash expense?Ch. 2 - The marginal tax rate is the tax rate which...Ch. 2 - Prob. 2.4CTFCh. 2 - Prob. 1CRCTCh. 2 - Accounting and Cash flows [LO2] Why might the...Ch. 2 - Prob. 3CRCTCh. 2 - Operating Cash Flow [LO2] In comparing accounting...Ch. 2 - Prob. 5CRCTCh. 2 - Cash Flow from Assets [LO4] Suppose a companys...Ch. 2 - Prob. 7CRCTCh. 2 - Net Working Capital and Capital Spending [LO4]...Ch. 2 - Prob. 9CRCTCh. 2 - Prob. 10CRCTCh. 2 - Prob. 11CRCTCh. 2 - Earnings Management [LO2] Companies often try to...Ch. 2 - Building a Balance Sheet [LO1] KCCO, Inc., has...Ch. 2 - Building an Income Statement [LO1] Billys...Ch. 2 - Dividends and Retained Earnings [LO1] Suppose the...Ch. 2 - Prob. 4QPCh. 2 - Calculating Taxes [LO3] The Dyrdek Co. had 267,000...Ch. 2 - Prob. 6QPCh. 2 - Calculating OCF [LO4] Ridiculousness, Inc., has...Ch. 2 - Calculating Net Capital Spending [LO4] Bowyer...Ch. 2 - Calculating Additions to NWC [LO4] The 2014...Ch. 2 - Cash Flow to Creditors [LO4] The 2014 balance...Ch. 2 - Cash Flow to Stockholders [LO4] The 2014 balance...Ch. 2 - Prob. 12QPCh. 2 - Market Values and Book Values [LO1] Klingon...Ch. 2 - Prob. 14QPCh. 2 - Using Income Statements [LO1] Given the following...Ch. 2 - Preparing a Balance Sheet [LO1] Prepare a 2015...Ch. 2 - Prob. 17QPCh. 2 - Prob. 18QPCh. 2 - Net Income and OCF [LO2] During 2014, Raines...Ch. 2 - Prob. 20QPCh. 2 - Prob. 21QPCh. 2 - Calculating Cash Flows [LO4] Consider the...Ch. 2 - Net Fixed Assets and Depreciation [LO4] On the...Ch. 2 - Prob. 24QPCh. 2 - Use the following information for Taco Swell,...Ch. 2 - Use the following information for Taco Swell,...Ch. 2 - Prob. 1MCh. 2 - Prob. 2M
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