Chapters 1-3 Review Problems and Answers

Chapters 1-3 Review Problems and Answers - Papa Roach...

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Papa Roach Exterminators, Inc., has sales of $586,000, costs of $247,000, depreciation expense of $43,000, interest expense of $32,000, and a tax rate of 35 percent. The firm paid out $73,000 in cash dividends, and has 85,000 shares of common stock outstanding. The earnings per share, or EPS are $ and the dividends per share are $. Explanation: Income Statement Sales $586,000 Costs 247,000 Depreciation 43,000 EBIT $296,000 Interest 32,000 EBT $264,000 Taxes(35%) 92,400 Net income $171,600 EPS = Net income / Shares = $171,600 / 85,000 = $2.02 per share DPS = Dividends / Shares = $73,000 / 85,000 = $0.86 per share So Long, Inc., has sales of $27,500, costs of $13,280, depreciation expense of $2,300, and interest expense of $1,105. If the tax rate is 35 percent, the operating cash flow, or OCF, is $. Explanation: To calculate OCF, we first need the income statement: Income Statement Sales $27,500
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Costs 13,280 Depreciation 2,300 EBIT $11,920 Interest 1,105 Taxable income $10,815 Taxes (35%) 3,785 Net income $7,030 OCF = EBIT (1-Tax Rate) + Depreciation = 11,290(1-0.35) + 2,300 = 9,638.50 During 2009, Raines Umbrella Corp. had sales of $550,000. Costs of goods sold, administrative and selling expenses, and depreciation expenses were $467,500, $55,000, and $55,000, respectively. In addition, the company had an interest expense of $82,500 and a tax rate of 36 percent. (Ignore any tax loss carryback or carryforward provisions.) a. Raines' net income for 2009 is $. b. Raines' operating cash flow is $. Explanation: a. Income Statement Sales $550,000 COGS 467,500 55,000 Depreciation 55,000 EBIT $-27,500 Interest 82,500 Taxable income $-110,000 Taxes (36%)
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0 Net income $-110,000 b. OCF = EBIT (1-Tax Rate) + Depreciation = (-27,500) (1 – 0.36) + 55,000 = 37,400 SDJ, Inc., has net working capital of $1,370, current liabilities of $3,720, and inventory of $1,950.
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Chapters 1-3 Review Problems and Answers - Papa Roach...

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