Last year, Rattner Robotic Corporation had $5 million in operating income (EBIT). Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 40%. At year-end, it had $14 million in current assets, $4 million in non-interest-bearing current liabilities, and $15 million in net plant and equipment (fixed assets). Also, assume the company's cost of capital is 7%. If the firm had $4.5 million in retained earnings at the beginning of the year and paid out total dividend of $1.15 million, what was its retained earnings at the end of the year?

Last year, Rattner Robotic Corporation had $5 million in operating income (EBIT). Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 40%. At year-end, it had $14 million in current assets, $4 million in non-interest-bearing current liabilities, and $15 million in net plant and equipment (fixed assets). Also, assume the company's cost of capital is 7%. If the firm had $4.5 million in retained earnings at the beginning of the year and paid out total dividend of $1.15 million, what was its retained earnings at the end of the year?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 4P: Talbot Enterprises recently reported an EBITDA of $8 million and net income of $2.4 million. It had...

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4. Last year Rattner Robotics had $5 million in operating income (EBIT). Its depreciationexpense was $1 million, its interest expense was $1 million, and its corporate tax rate was40%. At year-end, it had $14 million in current assets, $3 million in accounts payable, $1million in accruals, and $15 million in net plant and equipment. Assume that Rattner’s onlynoncash item was depreciation. a. What was the company’s net income?b. What was its net working capital (NWC)?c. Rattner had $12 million in net plant and equipment the prior year. Its net workingcapital has remained constant over time. What is the company’s free cash flow (FCF) forthe year that just ended?d. If the firm had $4.5 million in retained earnings at the beginning of the year and paidout total dividends of $1.2 million, what was its retained earnings at the end of the year?Assume that all dividends declared were actually paid.
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Patterson recently reported EBITA of $14.5 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?
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Mo’s INC recently reported an EBITDA of $15 million and net income of $5.3 million. It had $3 million of interest expense, and its corporate tax rate was 22%. What was its charge for depreciation and amortization?
Last year, Stewart-Stern Inc. reported $11,250 of sales, $4,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $2,500 of bonds outstanding that carry a 7.00% interest rate, and its federal-plus-state income tax rate was 25.00%. During last year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,600. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $900. By how much will the depreciation change cause (1) the firm's net income and (2) its free cash flow to change? Note that the company uses the same depreciation for tax and stockholder reporting purposes. Do not round the intermediate calculations
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A chemical company has a total income of 1.62 million per year and total expenses of 716057 not including depreciation. At the start of the first year of operation, a composite account of all depreciable assets shows a value of 1.24 with a MACRS recovery period of 7 years, and a straight-line recovery period of 9.4 years. Thirty-five percent of all profits before taxes must be paid out for income taxes. What would be the reduction in income tax charges for the first year of operation if the MACRS method were used for the depreciation accounting instead of the straight-line method?-
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