Q1K - depreciation ABC repaid $200 of their short-term debt...

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BUSINESS 312: QUIZ NAME ______________________________ Student Number__________________________ Instructions: Open book and open notes. Work independently. Hand-in no additional sheets of paper; use the back of this quiz if you need more space. If you wish to have your quiz returned, use pen rather than pencil for your answer. Show your work for full marks. No washroom breaks during the examination period. The following information is available on the financial accounts of ABC Corporation. 2008 EBITDA ? Depreciation ? Interest 35 2007 2008 Trade Capital 650 ? Short-Term Debt ? ? Net Fixed Assets ? 860 Equity 900 Invested Capital ? ? NOTES: "Equity" represents the sum of all of the accounting equity accounts (that is, 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 or future income tax liability in this problem (i.e., capital cost allowance is the same as financial statement
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Unformatted text preview: depreciation). ABC repaid $200 of their short-term debt at year-end 2008. The interest rate on ABC’s debt is 10% per annum. ABC made capital expenditures of $385 at year-end 2008. Because these capital expenditures were at year-end, ABC’s 2008 depreciation expense (also CCA) is a rate for depreciation times Net Fixed Assets at the beginning of 2008 (year-end 2007). The depreciation rate is 5% per annum. ABC paid dividends to shareholders of $X during 2008. ABC's tax rate is 40%. Also, during 2008, ABC sold new shares to new shareholders in the amount of $125 (no shares were repurchased). ABC’s 2008 free cash flow was $353. Required: (a) Determine ABC’s 2008 dividend payment, $X. (b) Determine ABC’s 2008 rate of return on invested capital, after tax and after depreciation, using beginning of period invested capital. Solution...
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