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comprehensive test

# comprehensive test - 1 You are considering an investment in...

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1 . You are considering an investment in Fields and Struthers, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of \$52 million, paid taxes of \$10 million, and its depreciation expense was \$5 million. Fields and Struthers' gross fixed assets increased by \$38 million from 2007 to 2008. The firm's current assets increased by \$20 million and spontaneous current liabilities increased by \$12 million. Calculate Fields and Struthers' operating cash flow (OCF), investment in operating capital (IOC) and free cash flow (FCF) for 2008. OCF = \$42,000,000; IOC = \$37,000,000; FCF = \$5,000,000 OCF = \$47,000,000; IOC = \$37,000,000; FCF = \$10,000,000 OCF = \$42,000,000; IOC = \$46,000,000; FCF = -\$4,000,000 OCF = \$47,000,000; IOC = \$46,000,000; FCF = \$1,000,000 OCF = EBIT - Taxes + Depreciation = (\$52M - \$10M + \$5M) = \$47M 2. You are considering an investment in Fields and Struthers, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of \$52 million, paid taxes of \$14 million, and its depreciation expense was \$5 million. Fields and Struthers' gross fixed assets increased by \$34 million from 2007 to 2008. The firm's current assets increased by \$20 million and spontaneous current liabilities increased by \$14 million. Calculate Fields and Struthers' operating cash flow(OCF), investment in operating capital (IOC) and free cash flow (FCF) for 2008. OCF = \$43,000,000; IOC = \$37,000,000; FCF = \$6,000,000 OCF = \$47,000,000; IOC = \$37,000,000; FCF = \$10,000,000 OCF = \$43,000,000; IOC = \$40,000,000; FCF = \$3,000,000 OCF = \$49,000,000; IOC = \$46,000,000; FCF = \$3,000,000 OCF = EBIT - Taxes + Depreciation = (\$52M - \$14M + \$5M) = \$43M 3. Tater and Pepper Corp. reported free cash flows for 2008 of \$20 million and investment in operating capital of \$15 million. Tater and Pepper listed \$8 million in depreciation expense and \$12 million in taxes on its 2008 income statement. Calculate Tater and Pepper's 2008 EBIT. \$49,000,000 \$42,000,000 \$39,000,000 \$47,000,000 FCF = Operating cash flow - Investment in operating capital; \$20M = X - \$15M; X = \$35M OCF = EBIT - Taxes + Depreciation; \$35M = (EBIT - \$12M + \$8M); EBIT = \$39M

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4. Mr. Husker's Tuxedos, Corp. began the year 2008 with \$205 million in retained earnings. The firm earned net income of \$30 million in 2008 and paid \$5 million to its preferred stockholders and \$12 million to its common stockholders. What is the year-end 2008 balance in retained earnings for Mr. Husker's Tuxedos? \$193,000,000 \$200,000,000 \$213,000,000 \$218,000,000 \$205M + \$30M - \$5m - \$12M = \$218M 5. Mr. Husker's Tuxedos, Corp. began the year 2008 with \$105 million in retained earnings. The firm earned net income of \$22 million in 2008 and paid \$2 million to its preferred stockholders and \$7 million to its common stockholders. What is the year-end 2008 balance in retained earnings for Mr. Husker's Tuxedos? \$118,000,000 \$109,000,000 \$74,000,000 \$76,000,000 \$105M + \$22M - \$2m - \$7M = \$118M 6. Use the following information to find dividends paid to common stockholders during 2008. \$18,000,000 \$17,000,000 \$22,000,000 \$24,000,000 \$998M - \$55M - \$965M = -\$22M = > \$22M - \$4M = \$18M 7.
Use the following information to find dividends paid to common stockholders during 2008. \$9,000,000 \$8,000,000 \$1,000,000 \$2,000,000 \$998M - \$42M - \$965M = -\$9M = > \$9M - \$8M = \$1M 8. award: 9.90 out of 10 points The 2008 income statement for Egyptian Noise Blasters shows that depreciation expense is \$35 million, EBIT is \$200 million, and taxes are \$50 million. At the end of the year, the balance of gross fixed assets was \$400 million. The change in net operating working capital during the year was \$45 million. Egyptian's free cash flow for the year was \$120 million. Calculate the beginning of year balance for gross fixed assets.

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