Corporate Finance: A Focused Approach (mindtap Course List)
7th Edition
ISBN: 9781337909747
Author: Michael C. Ehrhardt, Eugene F. Brigham
Publisher: South-Western College Pub
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Chapter 2, Problem 7P
Zucker Inc. recently reported $4 million in earnings before interest and taxes (EBIT). Its federal-plus-state tax rate is 25%. What is the
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What is the operating cash flow?
Use the following to determine FCF (Free Cash Flow) for the current year. Assume an effective tax rate of 25%:
Revenue
COGS (Cost of Goods Sold)
Gross Profit
Wages Expense
Rent and Other Occupancy Expense
Depreciation Expense
Operating Income
Current Assets
Accounts Receivable
Inventory
Total Current Assets
Gross Fixed Assets (at historical cost)
less: Accumulated Depreciation
Net Fixed Assets
Total Assets
Current Year
100,000
67,000
11,500
15,000
1,000
8,500
5,500
50,000
30,000
20,000
Prior Year
4,200
950
8,200
6,000
46,000
29,000
17,000
Current Liabilities
Accounts Payable
Wages Payable
Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234. Show a
decrease as a negative figure.
Type your answer...
4,500
900
Carter Swimming Pools has $23 million in net operating profit after taxes (NOPAT) in the current year. Carter has $15 million in total net operating assets in the current year and had $14 million in the previous year. What is its free cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
Chapter 2 Solutions
Corporate Finance: A Focused Approach (mindtap Course List)
Ch. 2 - Prob. 1QCh. 2 - Prob. 2QCh. 2 - Prob. 3QCh. 2 - Prob. 4QCh. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 1PCh. 2 - Prob. 2P
Ch. 2 - Hollys Art Galleries recently reported 7.9 million...Ch. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Zucker Inc. recently reported 4 million in...Ch. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - Rhodes Corporations financial statements are shown...Ch. 2 - The Bookbinder Company had 500,000 cumulative...Ch. 2 - Jenny Cochran, a graduate of the University of...Ch. 2 - Prob. 2MCCh. 2 - Prob. 3MCCh. 2 - Prob. 4MCCh. 2 - Prob. 5MCCh. 2 - Prob. 6MCCh. 2 - Prob. 7MCCh. 2 - Prob. 8MCCh. 2 - Prob. 9MCCh. 2 - Prob. 10MCCh. 2 - Prob. 12MC
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- The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?arrow_forwardCarter Swimming Pools has $16 million in net operating profit after taxes (NOPAT) in the current year. Carter has $12 million in total net operating assets in the current year and had $10 million in the previous year. What is its free cash flow?arrow_forwardAn investment of $83 generates after-tax cash flows of $50.00 in Year 1, $72.00 in Year 2, and $125.00 in Year 3. The required rate of return is 20 percent. Find the net present value. Which of the following is not an operating activity? a. Cash receipts for interest earned. b. Cash payments for operating expenses. c. Cash collections from credit customers. d. Cash payments for dividends to shareholders. Want answer with explanation. If u give me wrong answer I will give u down vote.arrow_forward
- Daniel's Market has sales of $36,000, costs of $28,000, depreciation expense of $3,000, and interest expense of $1,500. If the tax rate is 30 percent, what is the operating cash flow, OCF?arrow_forwardGiven the following information calculate the relevant annual Net Cash Flow After Tax [NCFAT], needed to calculate NPV. Forecast Annual Income $ Cash Revenue 360,000 Less Cash Operating Expenses 160,000 Admin Cash Flow Expenditure 60,000 Depreciation 36,000 Interest 24,000 Net Profit Before Tax Tax @30% 24,000 Net Profit After Tax 56,000arrow_forwardAcme Bank: Net profit after taxes = $10 million Assets = 200 ROE = 20% For the following show your calculations of how you arrived at your answer. a. Find ROA b. Find bank capital c. For each dollar of assets acquired by the bank, how much did the owners of the bank use of their own moneyarrow_forward
- Lim Motors has sales of RM116,400, costs of goods sold of RM64,800, depreciation of RM7,100 and interest paid of RM3,800. The tax rate is 21%. What is the value of the cash coverage ratio? Select one: a. 13.58 b. 17.27 c. 12.14 d. 23.41arrow_forwardA firm has sales of $96,400, costs of $53,800, interest paid of $2,800, and depreciation of $7,100. The tax rate is 34 percent. What is the value of the cash coverage ratio? ○ Al 1727 B) 1521 12.68 D) 12.14 0日 23.41arrow_forwardKonerko, Inc., manageent expects the company to earn cash flows of $13,227, $15,611, $18,970, and $19, 114 over the next four years. If the company uses an 8 percent discount rate, what is the future value of these cash flows at the end of year 4?arrow_forward
- Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O -26.37% 64.8% O-16.63% $110 million $101 million $61 millionarrow_forward(gnore income taxes in this problem.) Your Company is considering an investment that has the following data: Year 2 5 Investment $20,000 Cash inflow $12,000 $12,000 $15,000 $4,000 $4,000 In what year does the payback period for this investment occur? Year 2. Year 3. Year 4. Year 5.arrow_forwardSolve it correctly please. I will rate accordingly.arrow_forward
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