Quiz 1 for Marketing and Accounting Value - Financial Management | FIN 3123, Quizzes of Finance

Download Quiz 1 for Marketing and Accounting Value - Financial Management | FIN 3123 and more Quizzes Finance in PDF only on Docsity!  1. award: 5  out  of 5.00  points   Penguin   Pucks,   Inc.,   has   current   assets   of   $4,800,   net   fixed   assets   of   $27,500,   current   liabilities   of $4,200,  and  long-­term  debt  of  $10,500. What  is  the  value  of  the  shareholders’  equity  account  for  this  firm?    Shareholders’  equity $  17,600       How  much  is  net  working  capital?    Net  working  capital $  600         Worksheet Learning  Objective:  02-­01  The difference  between  accounting value  (or  “book”  value)  and  market value.     Penguin   Pucks,   Inc.,   has   current   assets   of   $4,800,   net   fixed   assets   of   $27,500,   current   liabilities   of $4,200,  and  long-­term  debt  of  $10,500. What  is  the  value  of  the  shareholders’  equity  account  for  this  firm?    Shareholders’  equity $       How  much  is  net  working  capital?    Net  working  capital $         Explanation: To  find  owners'  equity,  we  must  construct  a  balance  sheet  as  follows:     Balance  Sheet    CA $ 4,800           CL $ 4,200            NFA   27,500           LTD   10,500                 OE   ??                  TA $ 32,300           TL  &  OE $ 32,300                   We  know  that  total  liabilities  and  owners'  equity  (TL  &  OE)  must  equal  total  assets  of  $32,300.  We  also know   that   TL   &  OE   is   equal   to   current   liabilities   plus   long-­term   debt   plus   owners'   equity,   so   owners' equity  is:   OE  =  $32,300  –  10,500  –  4,200  =  $17,600   NWC  =  CA  –  CL  =  $4,800  –  4,200  =  $600   17,600  ±  0.1% 600  ±  1%  2. award: 5  out  of 5.00  points   Billy’s  Exterminators,   Inc.,  has  sales  of  $734,000,  costs  of  $315,000,  depreciation  expense  of  $48,000, interest  expense  of  $35,000,  and  a  tax  rate  of  35  percent. What  is  the  net  income  for  this  firm?    Net  income $  218,400         Worksheet Learning  Objective:  02-­01  The difference  between  accounting value  (or  “book”  value)  and  market value.     Billy’s  Exterminators,   Inc.,  has  sales  of  $734,000,  costs  of  $315,000,  depreciation  expense  of  $48,000, interest  expense  of  $35,000,  and  a  tax  rate  of  35  percent. What  is  the  net  income  for  this  firm?    Net  income $         Explanation: The  income  statement  for  the  company  is:     Income  Statement    Sales $ 734,000        Costs   315,000        Depreciation   48,000          EBIT $ 371,000        Interest   35,000          EBT $ 336,000        Taxes  (35%)   117,600          Net  income $ 218,400         218,400  ±  0.1%  5. award: 5  out  of 5.00  points   Klingon  Widgets,  Inc.,  purchased  new  cloaking  machinery  three  years  ago  for  $6  million.  The  machinery can   be   sold   to   the  Romulans   today   for   $5.3  million.   Klingon’s   current   balance   sheet   shows   net   fixed assets  of  $3.2  million,  current  liabilities  of  $900,000,  and  net  working  capital  of  $215,000.  If  all  the  current assets  were  liquidated  today,  the  company  would  receive  $1.25  million  cash. What  is  the  book  value  of  Klingon’s  total  assets  today?  (Enter  your  answer  in  dollars,  not  millions  of dollars,  i.e.  1,234,567.)    Book  value  of  total  assets $  4,315,000       What  is  the  market  value?  (Enter  your  answer  in  dollars,  not  millions  of  dollars,  i.e.  1,234,567.)    Market  value  of  total  assets $  6,550,000         Worksheet Learning  Objective:  02-­01  The difference  between  accounting value  (or  “book”  value)  and  market value.     Klingon  Widgets,  Inc.,  purchased  new  cloaking  machinery  three  years  ago  for  $6  million.  The  machinery can   be   sold   to   the  Romulans   today   for   $5.3  million.   Klingon’s   current   balance   sheet   shows   net   fixed assets  of  $3.2  million,  current  liabilities  of  $900,000,  and  net  working  capital  of  $215,000.  If  all  the  current assets  were  liquidated  today,  the  company  would  receive  $1.25  million  cash. What  is  the  book  value  of  Klingon’s  total  assets  today?  (Enter  your  answer  in  dollars,  not  millions  of dollars,  i.e.  1,234,567.)    Book  value  of  total  assets $       What  is  the  market  value?  (Enter  your  answer  in  dollars,  not  millions  of  dollars,  i.e.  1,234,567.)    Market  value  of  total  assets $         Explanation: To   find   the   book   value   of   current   assets,  we   use:  NWC  =  CA  –  CL.  Rearranging   to   solve   for   current assets,  we  get:   CA  =  NWC  +  CL  =  $215,000  +  900,000  =  $1,115,000   The  market  value  of  current  assets  and  fixed  assets  is  given,  so:          Book  value  CA $1,115,000       Market  value  CA $1,250,000        Book  value  NFA  3,200,000       Market  value  NFA  5,300,000              Book  value  assets $4,315,000       Market  value  assets $6,550,000             4,315,000  ±  0.01% 6,550,000  ±  0.01%  6. award: 5  out  of 5.00  points   Chevelle,   Inc.,   has   sales   of   $39,500,   costs   of   $18,400,   depreciation   expense   of   $1,900,   and   interest expense  of  $1,400. If  the  tax  rate  is  35  percent,  what  is  the  operating  cash  flow?    Operating  cash  flow $  14,870         Worksheet Learning  Objective:  02-­04  How  to determine  a  firm's  cash  flow  from  its financial  statements.     Chevelle,   Inc.,   has   sales   of   $39,500,   costs   of   $18,400,   depreciation   expense   of   $1,900,   and   interest expense  of  $1,400. If  the  tax  rate  is  35  percent,  what  is  the  operating  cash  flow?    Operating  cash  flow $         Explanation: To  calculate  OCF,  we  first  need  the  income  statement:       Income  Statement    Sales $ 39,500        Costs   18,400        Depreciation   1,900          EBIT $ 19,200        Interest   1,400          Taxable  income $ 17,800        Taxes  (35%)   6,230          Net  income $ 11,570             OCF  =  EBIT  +  Depreciation  –  Taxes  =  $19,200  +  1,900  –  6,230  =  $14,870   14,870  ±  0.1%  7. award: 5  out  of 5.00  points   The  2010  balance  sheet  of  Greystone,   Inc.,   showed  current   assets  of   $3,120  and  current   liabilities  of $1,570.  The  2011  balance  sheet  showed  current  assets  of  $3,460  and  current  liabilities  of  $1,980. What  was  the  company’s  2011  change  in  net  working  capital?  (Negative  amount  should  be  indicated by  a  minus  sign.)    Net  working  capital $  -­70         Worksheet Learning  Objective:  02-­04  How  to determine  a  firm's  cash  flow  from  its financial  statements.     The  2010  balance  sheet  of  Greystone,   Inc.,   showed  current   assets  of   $3,120  and  current   liabilities  of $1,570.  The  2011  balance  sheet  showed  current  assets  of  $3,460  and  current  liabilities  of  $1,980. What  was  the  company’s  2011  change  in  net  working  capital?  (Negative  amount  should  be  indicated by  a  minus  sign.)    Net  working  capital $         Explanation: Change  in  NWC  =  NWCend  –  NWCbeg Change  in  NWC  =  (CAend  –  CLend)  –  (CAbeg  –  CLbeg) Change  in  NWC  =  ($3,460  –  1,980)  –  ($3,120  –  1,570) Change  in  NWC  =  $1,480  –  1,550  =  –$70   -­70  ±  1%