Unit 2 Assignment
Content
Unit2 Assignment
Chapter 2 problem 2-8, p. 79
The Wendt Corporation had $10.5 million of taxable income. a. What is the company’s federal income tax bill for the year? Answer: T= 3,400,000 + .35(10.5 mill – 10 mill) T= 3,400,000 + .35 (500,000) T= 3,400,000 + 175,000 T axes= 3,575,000
b. Assume the firm receives an additional $1 million of interest from some bonds it owns. What is the tax on this interest income? Answer: $1,000,000.00 x 0.35 = $350,000.00 c. Now assume that Wendt does not receive the interest income but does receive an additional $1 million as dividends on some stock it owns. What is the tax on this dividend income? Answer: $1.000, 000.00 x 0.105 = $105, 000.00
Chapter 3 p.112 problem 3-6. Du Pont Analysis
Donaldson & Sons has a ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? Answer: ROA = 10%; PM = 2%; ROE = 15% PM = NI/Sales = ROA = NI/TA = NI/Sales x Sales/TA NI/TA = PM x TATO 10% = 2% x TATO = TATO = 5 What is the firm’s equity multiplier? Answer: ROE = PM x TATO x TA/E [Equity Multiplier] DU Pont= 15% = 2% x 5 x EM 15%/10% = EM = 1.5
Chapter 3 p.113 problem 3-11
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: 0.80 Total Assets Turnover: 1.5 Days Sales Outstanding: 36.5 days (based upon 365 day year) Gross Profit margin on sales: (Sales – Cost of goods sold)/Sales = 25% Inventory turnover ratio: 5.0
Balance Sheet Cash AR Inventories Fixed assets Total assets Sales $27,000 $45,000 $90000 $138000 $300,000 $450,000 Accounts Payable Long-term debt Common Stock Retained Earnings Total liabilities & equity Cost of goods sold $90,000 $60,000 $52,500 $97,500 $300,000 $337,500
Chapter 2 problem 2-8, p. 79
The Wendt Corporation had $10.5 million of taxable income. a. What is the company’s federal income tax bill for the year? Answer: T= 3,400,000 + .35(10.5 mill – 10 mill) T= 3,400,000 + .35 (500,000) T= 3,400,000 + 175,000 T axes= 3,575,000
b. Assume the firm receives an additional $1 million of interest from some bonds it owns. What is the tax on this interest income? Answer: $1,000,000.00 x 0.35 = $350,000.00 c. Now assume that Wendt does not receive the interest income but does receive an additional $1 million as dividends on some stock it owns. What is the tax on this dividend income? Answer: $1.000, 000.00 x 0.105 = $105, 000.00
Chapter 3 p.112 problem 3-6. Du Pont Analysis
Donaldson & Sons has a ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? Answer: ROA = 10%; PM = 2%; ROE = 15% PM = NI/Sales = ROA = NI/TA = NI/Sales x Sales/TA NI/TA = PM x TATO 10% = 2% x TATO = TATO = 5 What is the firm’s equity multiplier? Answer: ROE = PM x TATO x TA/E [Equity Multiplier] DU Pont= 15% = 2% x 5 x EM 15%/10% = EM = 1.5
Chapter 3 p.113 problem 3-11
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: 0.80 Total Assets Turnover: 1.5 Days Sales Outstanding: 36.5 days (based upon 365 day year) Gross Profit margin on sales: (Sales – Cost of goods sold)/Sales = 25% Inventory turnover ratio: 5.0
Balance Sheet Cash AR Inventories Fixed assets Total assets Sales $27,000 $45,000 $90000 $138000 $300,000 $450,000 Accounts Payable Long-term debt Common Stock Retained Earnings Total liabilities & equity Cost of goods sold $90,000 $60,000 $52,500 $97,500 $300,000 $337,500
