[Solved]Complete Assignment Jordan Fundamentals of Corporate Finance Chapter 2

Cash Flow to Creditors [LO4] The 2008 balance sheet of Maria’s Tennis Shop, Inc., showed long-term debt of $2.6 million, and the 2009 balance sheet showed long-term debt of $2.9 million. The 2009 income statement showed an interest expense of $170,000. What was the fi rm’s cash fl ow to creditor...

Calculating Additions to NWC [LO4] The 2008 balance sheet of Saddle Creek, Inc., showed current assets of $2,100 and current liabilities of $1,380. The 2009 balance sheet showed current assets of $2,250 and current liabilities of $1,710. What was the company’s 2009 change in net working capital, o...

Calculating Net Capital Spending [LO4] Earnhardt Driving School’s 2008 balance sheet showed net fi xed assets of $3.4 million, and the 2009 balance sheet showed net fi xed assets of $4.2 million. The company’s 2009 income statement showed a depreciation expense of $385,000. What was net capital ...

Calculating OCF [LO4] So Long, Inc., has sales of $27,500, costs of $13,280, depreciation expense of $2,300, and interest expense of $1,105. If the tax rate is 35 percent, what is the operating cash fl ow, or OCF?

Tax Rates [LO3] In Problem 6, what is the average tax rate? What is the marginal tax rate?

Calculating Taxes [LO3] The Renata Co. had $236,000 in 2009 taxable income. Using the rates from Table 2.3 in the chapter, calculate the company’s 2009 income taxes.

Market Values and Book Values [LO1] Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $7 million. The machinery can be sold to the Romulans today for $4.9 million. Klingon’s current balance sheet shows net fi xed assets of $3.7 million, current liabilities of $1.1 million...

Per-Share Earnings and Dividends [LO1] Suppose the fi rm in Problem 3 had 85,000 shares of common stock outstanding. What is the earnings per share, or EPS, fi gure? What is the dividends per share fi gure?

Dividends and Retained Earnings [LO1] Suppose the fi rm in Problem 2 paid out $73,000 in cash dividends. What is the addition to retained earnings?

Building an Income Statement [LO1] Papa Roach Exterminators, Inc., has sales of $586,000, costs of $247,000, depreciation expense of $43,000, interest expense of $32,000, and a tax rate of 35 percent. What is the net income for this fi rm?

Building a Balance Sheet [LO1] Penguin Pucks, Inc., has current assets of $5,100, net fi xed assets of $23,800, current liabilities of $4,300, and long-term debt of $7,400. What is the value of the shareholders’ equity account for this fi rm? How much is net working capital?

Earnings Management [LO2] Companies often try to keep accounting earnings growing at a relatively steady pace, thereby avoiding large swings in earnings from period to period. They also try to meet earnings targets. To do so, they use a variety of tactics. The simplest way is to control the timing o...

Enterprise Value [LO1] A fi rm’s enterprise value is equal to the market value of its debt and equity, less the fi rm’s holdings of cash and cash equivalents. This fi gure is particularly relevant to potential purchasers of the fi rm. Why?

Firm Values [LO1] Referring back to the General Motors example used at the beginning of the chapter, note that we suggested that General Motors’ stockholders probably didn’t suffer as a result of the reported loss. What do you think was the basis for our conclusion?

Cash Flow to Stockholders and Creditors [LO4] Could a company’s cash fl ow to stockholders be negative in a given year? ( Hint: Yes.) Explain how this might come about. What about cash fl ow to creditors?

Net Working Capital and Capital Spending [LO4] Could a company’s change in NWC be negative in a given year? ( Hint: Yes.) Explain how this might come about. What about net capital spending?

Operating Cash Flow [LO4] Suppose a company’s operating cash fl ow has been negative for several years running. Is this necessarily a good sign or a bad sign?

Cash Flow from Assets [LO4] Suppose a company’s cash fl ow from assets is negative for a particular period. Is this necessarily a good sign or a bad sign?

Book Values versus Market Values [LO1] Under standard accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs, the owners’ equity is negative. Can this happen with market values? Why or why not?

Operating Cash Flow [LO4] In comparing accounting net income and operating cash fl ow, name two items you typically fi nd in net income that are not in operating cash fl ow. Explain what each is and why it is excluded in operating cash fl ow.

Book Values versus Market Values [LO1] In preparing a balance sheet, why do you think standard accounting practice focuses on historical cost rather than market value?

Accounting and Cash Flows [LO2] Why might the revenue and cost fi gures shown on a standard income statement not be representative of the actual cash infl ows and outfl ows that occurred during a period?

Liquidity [LO1] What does liquidity measure? Explain the trade-off a fi rm faces between high liquidity and low liquidity levels.