midJ - Midterm Examination, Evening Section, BUS312, Fall...

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Midterm Examination, Evening 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 ? Short-term Debt 400 Net Fixed Assets 800 Equity ? Invested Capital ? 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). The interest rate on ABC’s short-term debt is 8% per annum. ABC’s tax rate is 40%. ABC’s rate of return on equity (ROE) for 2007 using end of period book equity is 16.8%. Their rate of return on invested capital for 2007, after tax and after depreciation, using end of period invested capital, is 12%. Required: Find ABC’s 2007 year-end invested capital. Solution
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2. (10 marks) ABC Company Ltd is a Canadian company that has a tax rate of 34.12% for 2007. Taxable income before the taxable portion of realized capital gain times this tax rate plus 41.12% times the taxable portion of realized capital gains is tax liability for 2007.
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This note was uploaded on 02/10/2011 for the course BUS 312 taught by Professor Alan during the Spring '03 term at Simon Fraser.

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midJ - Midterm Examination, Evening Section, BUS312, Fall...

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