midi - Midterm Examination Day Section, BUS312, Fall 2007...

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Midterm Examination Day Section, BUS312, Fall 2007 NAME : ____________________________________Student #____________________ Instructions: For qualitative questions, point form is not an acceptable answer. For quantitative questions, an indication of how you arrived at particular numbers is required for the purpose of assigning part marks. There are a total of 60 marks on this examination. This examination is composed of 6 questions and 6 pages. Answer all questions on the examination. No other papers will be marked. The examination period is one hour and fifty minutes . If you use pencil, your midterm will not be returned. No washroom breaks during the examination period. 1. (10 marks) The following information is available on the financial accounts of ABC Corporation. 2007 EBITDA ? Depreciation ? Interest ? 2007 Trade Capital 200 Short-term Debt ? Net Fixed Assets 800 Equity ? Invested Capital 1,000 NOTES: “Equity” represents the sum of all of the accounting equity accounts (e.g., share-capital plus retained earnings). You can presume that depreciation for tax and for financial statement purposes is the same, and therefore, there is no deferred income tax in this problem (i.e., capital cost allowance is the same as financial statement depreciation). ABC neither borrowed incrementally nor repaid short-term debt during 2007, and therefore, its interest expense for 2007 is the opening balance for 2007 (same as the closing balance) times the interest rate on its short-term debt, which is 6.25% per annum. ABC’s tax rate is 40%. ABC’s rate of return on invested capital for 2007, after tax and after depreciation, using end of period invested capital is 27%. ABC’s ROE for 2007 using end of period book equity is 42.5%.
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This note was uploaded on 03/31/2010 for the course BUS 316 taught by Professor Blazenko during the Winter '08 term at The University of British Columbia.

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midi - Midterm Examination Day Section, BUS312, Fall 2007...

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