(2.8) MVA [i]. Over the years Janjigian Corporation’s stockholders have provided $15 250 of capital part when they purchased new issues of stock and part when they allowed management to retain some of the firm’s earnings. The firm now has 1 000 shares of common stock outstanding and it sells at a price of $42.00 per share. How much value has Janjigian’s management added to stockholder wealth over the years i.e. what is Janjigian’s MVA? a. $21 788 b. $22 935 c. $24 142 d. $25 413 e. $26 750 Easy/Medium: (2.3) Income statement:net after-tax income [ii]. Meric Mining Inc. recently reported $15 000 of sales $7 500 of operating costs other than depreciation and $1 200 of depreciation. The company had no amortization charges it had outstanding $6 500 of bonds that carry a 6.25% interest rate and its federal-plus-state income tax rate was 35%. How much was the firm’s net income after taxes? Meric uses the same depreciation expense for tax and stockholder reporting purposes. a. $3 284.55 b. $3 457.42 c. $3 639.39 d. $3 830.94 e. $4 022.48 (2.4) Statement of stockholders’ equity: dividends [iii]. On 12/31/10 Heaton Industries Inc. reported retained earnings of $675 000 on its balance sheet and it reported that it had $172 500 of net income during the year. On its previous balance sheet at 12/31/09 the company had reported $555 000 of retained earnings. No shares were repurchased during 2010. How much in dividends did Heaton pay during 2010? a. $47 381 b. $49 875 c. $52 500 d. $55 125 e. $57 881 (2.4) Statement of stockholders’ equity: NI [iv]. During the year Bascom Bakery Inc. paid out $21 750 of common dividends. It ended the year with $187 500 of retained earnings versus the prior year’s retained earnings of $132 250. How much net income did the firm earn during the year? a. $77 000 b. $80 850 c. $84 893 d. $89 137 e. $93 594 (2.7) Total operating capital [v]. NNR Inc.’s balance sheet showed total current assets of $1 875 000 plus $4 225 000 of net fixed assets. All of these assets were required in operations. The firm’s current liabilities consisted of $475 000 of accounts payable $375 000 of 6% short-term notes payable to the bank and $150 000 of accrued wages and taxes. Its remaining capital consisted of long-term debt and common equity. What was NNR’s total investor-provided operating capital? a. $4 694 128 b. $4 941 188 c. $5 201 250 d. $5 475 000 e. $5 748 750 Medium: (2.3) Income statement: change in net income [vi]. Last year Tiemann Technologies reported $10 500 of sales $6 250 of operating costs other than depreciation and $1 300 of depreciation. The company had no amortization charges it had $5 000 of bonds that carry a 6.5% interest rate and its federal-plus-state income tax rate was 35%. This year’s data are expected to remain unchanged except for one item depreciation which is expected to increase by $750. By how much will net after-tax income change as a result of the change in depreciation? The company uses the same depreciation calculations for tax and stockholder reporting purposes. a. -463.13 b. -487.50 c. -511.88 d. -537.47 e. -564.34 (2.7) Free cash flow [vii]. TSW Inc. had the following data for last year: Net income = $800; Net operating profit after taxes (NOPAT) = $700; Total assets = $3 000; and Total operating capital = $2 000. Information for the just-completed year is as follows: Net income = $1 000; Net operating profit after taxes (NOPAT) = $925; Total assets = $2 600; and Total operating capital = $2 500. How much free cash flow did the firm generate during the just-completed year? a. $383 b. $425 c. $468 d. $514 e. $566 (2.7) Net operating working capital [viii]. Rao Corporation has the following balance sheet. How much net operating working capital does the firm have? Cash $ 10 Accounts payable $ 20 Short-term investments Accruals 20 Accounts receivable 50 Notes payable 50 Inventory 40 Current liabilities $ 90 Current assets $130 Long-term debt 0 Net fixed assets 100 Common equity 30 Retained earnings 50 Total assets $230 Total liab. & equity $230 a. $54.00 b. $60.00 c. $66.00 d. $72.60 e. $79.86
