Week 2 Homework - Week 2 Homework 3-2 The four financial...

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Week 2 Homework 3-2 The four financial statements contained in most annual reports are the balance sheet, income statement, statement of retained earnings, and statement of cash flows. 3-3 No, because the $20 million of retained earnings would probably not be held as cash. The retained earnings figure represents the reinvestment of earnings by the firm. Consequently, the $20 million would be an investment in all of the firm’s assets. 3-7 Income $365,000 Less Interest deduction (50,000) Plus: Dividends receiveda 4,500 Taxable income $319,500 aFor a corporation, 70% of dividends received are excluded from taxes; therefore, taxable dividends are calculated as $15,000(1 - 0.70) = $4,500. Tax = $22,250 + ($319,500 - $100,000)(0.39) = $22,250 + $85,605 = $107,855. After-tax income: Taxable income $319,500 Taxes (107,855) Plus Non-taxable dividends receivedb 10,500 Net income $222,145 bNon-taxable dividends are calculated as $15,000 x 0.7 = $10,500.
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This note was uploaded on 03/26/2012 for the course F1515 F1515 taught by Professor Stan during the Spring '10 term at Keller Graduate School of Management.

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Week 2 Homework - Week 2 Homework 3-2 The four financial...

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