Business and Finance problems

timer Asked: Jan 19th, 2014

Question description

Problem 1

Kendall Corners Inc. recently reported net income of $3.4 million and depreciation of $578,000. What was its net cash flow? Assume it had no amortization expense.

Problem 2

Corporate bonds issued by Johnson Corporation currently yield 8.5%. Municipal bonds of equal risk currently yield 4%. At what tax rate would an investor be indifferent between these two bonds? Round your answer to two decimal places.

Problem 3

The Shrieves Corporation has $10,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 8%, state of Florida muni bonds, which yield 4% (but are not taxable), and AT&T preferred stock, with a dividend yield of 6.5%. Shrieves's corporate tax rate is 40%, and 70% of the dividends received are tax exempt. Find the after-tax rates of return on all three securities. Round your answers to two decimal places.

A-T rate of return on AT&T bond

A-T rate of return on Florida muni bonds

A-T rate of return on AT&T preferred stock

Problem 4

Complete the balance sheet and sales information in the table that follows for Hoffmeister Industries using the following financial data:

Debt ratio: 50%
Quick ratio: 1.15
Total assets turnover: 2.5
Days sales outstanding: 33.5 days*
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 27%
Inventory turnover ratio: 5.0

* Calculation is based on a 365-day year.

Round your answers to the nearest whole dollar.














$ 60,000





Common stock



Fixed assets





$ 97,500


Total assets


$ 300,000


  liabilities and equity






Cost of goods


Problem 5

Little Books Inc. recently reported $2.25 million of net income. Its EBIT was $6.75 million, and its tax rate was 40%. What was its interest expense? (Hint:Write out the headings for an income statement and then fill in the known values. Then divide $2.25 million net income by(1 - T) = 0.6to find the pre-tax income. The difference between EBIT and taxable income must be the interest expense. Use this same procedure to work some of the other problems.) Round your answer to the nearest whole dollar and enter your answer as a dollar amount.

Problem 6

A company has an EPS of $2.20, a cash flow per share of $4.55, and a price/cash flow ratio of 8.0. What is its P/E ratio? Round your answer to two decimal places.

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