Exam 2: Financial statements, cash flow, and taxes

Net operating profit after taxes (NOPAT)is the amount of net income a company would generate from its operations if it had no interest income or interest expense.

EP Enterprises has the following income statement.How much net operating profit after taxes (NOPAT)does the firm have?

Which of the following statements is CORRECT?

Last year, Michelson Manufacturing reported $10, 250 of sales, $3, 500 of operating costs other than depreciation, and $1, 250 of depreciation.The company had no amortization charges, it had $3, 500 of bonds outstanding 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 $725.By how much will the depreciation change cause the firm's net after-tax income and its net cash flow to change? Note that the company uses the same depreciation calculations for tax and stockholder reporting purposes.

Below is the common equity section (in millions)of Fethe Industries' last two year-end balance sheets: The company has never paid a dividend to its common stockholders.Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

The current cash flow from existing assets is highly relevant to the investor.However, since the value of the firm depends primarily upon its growth opportunities, profit projections from those opportunities are the only relevant future flows with which investors are concerned.

The annual report contains four basic financial statements: the income statement, balance sheet, statement of cash flows, and statement of stockholders' equity.

The fact that 70% of the interest income received by a corporation is excluded from its taxable income encourages firms to use more debt financing than they would in the absence of this tax law provision.

Which of the following statements is CORRECT?

Ullrich Printing Inc.paid out $21, 750 of common dividends during the year.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?

Hunter Manufacturing Inc.'s December 31, 2012, balance sheet showed total common equity of $2, 050, 000 and 100, 000 shares of stock outstanding.During 2013, Hunter had $250, 000 of net income, and it paid out $100, 000 as dividends.What was the book value per share at 12/31/13, assuming that Hunter neither issued nor retired any common stock during 2013?

To estimate the cash flow from operations, depreciation must be added back to net income because it is a non-cash charge that has been deducted from revenue.

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

If the tax laws were changed so that $0.50 out of every $1.00 of interest paid by a corporation was allowed as a tax-deductible expense, this would probably encourage companies to use more debt financing than they presently do, other things held constant.

Which of the following statements is CORRECT?

Which of the following items is NOT included in current assets?

On 12/31/2013, 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 12/31/2012, the company had reported $555, 000 of retained earnings.No shares were repurchased during 2013.How much in dividends did Heaton pay during 2013?

Which of the following statements is CORRECT?