midM - Midterm Examination BUS312 Day FALL 2008...

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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 exam period. 1. (10 marks) The following information is available on the financial accounts of ABC Corporation. 2008 EBITDA 700 Depreciation 520 Interest 100 2008 Trade Capital ? Short-term Debt ? Net Fixed Assets ? Equity ? Invested Capital ? NOTES: “Equity” is 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 paid down no debt during 2008, and therefore, their opening debt balance for 2008 equals their closing 2008 debt balance. ABC’s tax rate is 40%. ABC’s 2008 rate of return on equity (with 2008 year-end book equity) equals their 2008 rate of return on invested capital (after tax, after depreciation, with 2008 year-end invested capital). Required: Find ABC’s year-end 2008 equity to invested capital ratio (2008 year-end equity
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midM - Midterm Examination BUS312 Day FALL 2008...

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