HW # 4 (2) - Fin 3301 Practice for chapter 4 Problem 1...

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Fin 3301 Practice for chapter 4 Problem # 1 Bargain Basement Stores reported the following information from their financial statements: Operating income (EBIT) = $16 million. Interest payments = $2.25 million. Dividend income = $0.8 million. Calculate Bargain Basement Stores total tax liability using the corporate tax schedule below: Percentage on Taxable Income Excess above Base $0-$50,000 15% $50,000-$75,000 25 $75,000-$100,000 34 $100,000-$335,000 39 $335,000-$10,000,000 34 $10,000,000-$15,000,000 35
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$15,000,000-$18,333,333 38 Over $18,333,333 35 Problem # 2 Meyersdale Office Supplies has common equity of $40 million. The company’s stock price is $80 per share and its market/book ratio is 4.0. How many shares of stock does the company have outstanding? We have to calculate the market/ Book ratio: (M/B) = ((price per share* shares) / book Value) => 4= ((80*shares)/ 40000000) , solved to shares => shares = 2000000 Problem # 3 A firm has a profit margin of 15% on sales of $20,000,000. If the firm has debt of $7,500,000, total assets of $22,500,000, what is the firm’s ROA? Net income=0.15($20,000,000) = $3,000,000. ROA = $3,000,000/$22,500,000 = 13.3%. Problem # 4 Tapley Dental Supply Company has the following data:
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Net income $240 Sales $10,000 Total assets $6,000 Debt ratio 75%
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