Exam 2: Reviewing Financial Statements

Consider a firm with an EBIT of $5,000,000.The firm finances its assets with $20,000,000 debt (costing 5 percent)and 70,000 shares of stock selling at $50.00 per share.To reduce the firm's risk associated with this financial leverage,the firm is considering reducing its debt by $5,000,000 by selling an additional 100,000 shares of stock.The firm is in the 40 percent tax bracket.The change in capital structure will have no effect on the operations of the firm.Thus,EBIT will remain $5,000,000.What is the change in the firm's EPS from this change in capital structure?

Which of the following activities result in an increase in a firm's cash?

If a company reports a large amount of net income on its income statement during a year,the firm will have

Dogs 4 U Corporation has net cash flow from financing activities for the last year of $10 million.The company paid $8 million in dividends last year.During the year,the change in notes payable on the balance was $9 million,and change in common and preferred stock was $0 million.The end of year balance for long-term debt was $44 million.Calculate the beginning of year balance for long-term debt.

The 2018 income statement for Lou's Shoes shows that depreciation expense is $2 million,EBIT is $5 million,EBT is $3 million,and the tax rate is 40 percent.At the beginning of the year,the balance of gross fixed assets was $16 million and net operating working capital was $6 million.At the end of the year gross fixed assets was $20 million.Lou's free cash flow for the year was $4 million.What is their end of year balance for net operating working capital?