Old Exam Questions - Financial Statements, Cash Flow, and Taxes
Page 17 of 44 Pages
Variable Costs
Fixed Costs
EBIT
Interest
EBT
Taxes
Net Income
Dividends
Per Share
A.
$43.48
B.
$45.42
C.
$39.46
D.
$41.40
E.
$37.44
21.
Assume that a firm’s optimal capital structure consists of 30% debt at a before-tax cost
of debt (K
D
) of 6 percent, 10% preferred stock at a cost of preferred (K
P
) of 8 percent,
and 60% stock at a cost of stock (K
S
) of 12 percent (you may assume that the firm will
be able to meet all of its equity needs through retained earnings). Now assume that
the firm has $6,500,000 of invested capital, EBIT of $1,125,000, and a tax rate of 40
percent. Based on this information, determine the firm’s economic value added (EVA).
A.
$80,200
B.
$84,800
C.
$89,400
D.
$82,500
E.
$87,100
22.
Assume that a firm’s optimal capital structure (investor supplied capital) consists of
$30,000 of debt at a before-tax cost of debt (K
D
) of 8 percent, $10,000 of preferred
stock at a cost of preferred (K
P
) of 8 percent, and $60,000 of stock at a cost of stock
(K
S
) of 14 percent. Also assume that the firm’s tax rate is 40% and that its EBIT is
$53,750. Given this information, determine the firm’s EVA.
A.
$22,610
B.
$20,610
C.
$23,610
D.
$21,610
E.
$24,610
23.
Assume that your company has the following information for the previous year: Net
income = $300; Net operating profit after taxes (NOPAT) = $330; Total assets =
$2,000; and Total net operating capital = $1,500. Also assume that the information for
the current year is: Net income = $510; Net operating profit after taxes (NOPAT) =