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[Solved]Complete Assignment Jordan Fundamentals of Corporate Finance Chapter 2
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[Show more]Calculating Cash Flow [LO4] For 2009, calculate the cash fl ow from assets, cash
fl ow to creditors, and cash fl ow to stockholders. 
2008 2009
Sales
Depreciation
Cost of goods sold
Other expenses
Interest
Cash
Accounts receivable
Short-term notes payable
Long-term debt
Net fi xed assets
Accounts pa...
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Add to cartCalculating Cash Flow [LO4] For 2009, calculate the cash fl ow from assets, cash
fl ow to creditors, and cash fl ow to stockholders. 
2008 2009
Sales
Depreciation
Cost of goods sold
Other expenses
Interest
Cash
Accounts receivable
Short-term notes payable
Long-term debt
Net fi xed assets
Accounts pa...
Financial Statements [LO1] Draw up an income statement and balance sheet for
this company for 2008 and 2009. 
2008 2009
Sales
Depreciation
Cost of goods sold
Other expenses
Interest
Cash
Accounts receivable
Short-term notes payable
Long-term debt
Net fi xed assets
Accounts payable
Inventory
Dividend...
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Add to cartFinancial Statements [LO1] Draw up an income statement and balance sheet for
this company for 2008 and 2009. 
2008 2009
Sales
Depreciation
Cost of goods sold
Other expenses
Interest
Cash
Accounts receivable
Short-term notes payable
Long-term debt
Net fi xed assets
Accounts payable
Inventory
Dividend...
Tax Rates [LO3] Refer to the corporate marginal tax rate information in
Table 2.3 .
 a. Why do you think the marginal tax rate jumps up from 34 percent to 39 percent
at a taxable income of $100,001, and then falls back to a 34 percent marginal
rate at a taxable income of $335,001?
 b. Compute the av...
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Add to cartTax Rates [LO3] Refer to the corporate marginal tax rate information in
Table 2.3 .
 a. Why do you think the marginal tax rate jumps up from 34 percent to 39 percent
at a taxable income of $100,001, and then falls back to a 34 percent marginal
rate at a taxable income of $335,001?
 b. Compute the av...
Net Fixed Assets and Depreciation [LO4] On the balance sheet, the net fi xed
assets (NFA) account is equal to the gross fi xed assets (FA) account (which records
the acquisition cost of fi xed assets) minus the accumulated depreciation (AD)
account (which records the total depreciation taken by the ...
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Add to cartNet Fixed Assets and Depreciation [LO4] On the balance sheet, the net fi xed
assets (NFA) account is equal to the gross fi xed assets (FA) account (which records
the acquisition cost of fi xed assets) minus the accumulated depreciation (AD)
account (which records the total depreciation taken by the ...
Calculating Cash Flows [LO4] Consider the following abbreviated fi nancial
statements for Parrothead Enterprises:
PARROTHEAD ENTERPRISES
2008 and 2009 Partial Balance Sheets
Assets Liabilities and Owners’ Equity
2008 2009 2008 2009
Current assets
Net fi xed assets
$ 653
 2,691
$ 707
 3,240
Current...
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Add to cartCalculating Cash Flows [LO4] Consider the following abbreviated fi nancial
statements for Parrothead Enterprises:
PARROTHEAD ENTERPRISES
2008 and 2009 Partial Balance Sheets
Assets Liabilities and Owners’ Equity
2008 2009 2008 2009
Current assets
Net fi xed assets
$ 653
 2,691
$ 707
 3,240
Current...
Calculating Cash Flows [LO2] Dahlia Industries had the following operating
results for 2009: sales $22,800; cost of goods sold $16,050; depreciation
expense $4,050; interest expense $1,830; dividends paid $1,300. At the
beginning of the year, net fi xed assets were $13,650, current assets were ...
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Add to cartCalculating Cash Flows [LO2] Dahlia Industries had the following operating
results for 2009: sales $22,800; cost of goods sold $16,050; depreciation
expense $4,050; interest expense $1,830; dividends paid $1,300. At the
beginning of the year, net fi xed assets were $13,650, current assets were ...
Accounting Values versus Cash Flows [LO4] In Problem 19, suppose Raines
Umbrella Corp. paid out $25,000 in cash dividends. Is this possible? If spending on
net fi xed assets and net working capital was zero, and if no new stock was issued
during the year, what do you know about the fi rm’s long-te...
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Add to cartAccounting Values versus Cash Flows [LO4] In Problem 19, suppose Raines
Umbrella Corp. paid out $25,000 in cash dividends. Is this possible? If spending on
net fi xed assets and net working capital was zero, and if no new stock was issued
during the year, what do you know about the fi rm’s long-te...
Net Income and OCF [LO2] During 2009, Raines Umbrella Corp. had sales of
$730,000. Cost of goods sold, administrative and selling expenses, and depreciation
expenses were $580,000, $105,000, and $135,000, respectively. In addition, the
company had an interest expense of $75,000 and a tax rate of 35 ...
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Add to cartNet Income and OCF [LO2] During 2009, Raines Umbrella Corp. had sales of
$730,000. Cost of goods sold, administrative and selling expenses, and depreciation
expenses were $580,000, $105,000, and $135,000, respectively. In addition, the
company had an interest expense of $75,000 and a tax rate of 35 ...
Marginal versus Average Tax Rates [LO3] (Refer to Table 2.3 .) Corporation
Growth has $88,000 in taxable income, and Corporation Income has $8,800,000 in
taxable income.
 a. What is the tax bill for each fi rm?
 b. Suppose both fi rms have identifi ed a new project that will increase taxable
income ...
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Add to cartMarginal versus Average Tax Rates [LO3] (Refer to Table 2.3 .) Corporation
Growth has $88,000 in taxable income, and Corporation Income has $8,800,000 in
taxable income.
 a. What is the tax bill for each fi rm?
 b. Suppose both fi rms have identifi ed a new project that will increase taxable
income ...
Residual Claims [LO1] Dimeback, Inc., is obligated to pay its creditors $7,300
during the year.
 a. What is the market value of the shareholders’ equity if assets have a market
value of $8,400?
 b. What if assets equal $6,700?
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Add to cartResidual Claims [LO1] Dimeback, Inc., is obligated to pay its creditors $7,300
during the year.
 a. What is the market value of the shareholders’ equity if assets have a market
value of $8,400?
 b. What if assets equal $6,700?
Preparing a Balance Sheet [LO1] Prepare a 2009 balance sheet for Bertinelli
Corp. based on the following information: cash $195,000; patents and copyrights $780,000; accounts payable $405,000; accounts receivable $137,000;
tangible net fi xed assets $2,800,000; inventory $264,000; notes payabl...
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Add to cartPreparing a Balance Sheet [LO1] Prepare a 2009 balance sheet for Bertinelli
Corp. based on the following information: cash $195,000; patents and copyrights $780,000; accounts payable $405,000; accounts receivable $137,000;
tangible net fi xed assets $2,800,000; inventory $264,000; notes payabl...
Using Income Statements [LO1] Given the following information for Rosato
Pizza Co., calculate the depreciation expense: sales $41,000; costs $19,500;
addition to retained earnings $5,100; dividends paid $1,500; interest
expense $4,500; tax rate 35 percent.
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Add to cartUsing Income Statements [LO1] Given the following information for Rosato
Pizza Co., calculate the depreciation expense: sales $41,000; costs $19,500;
addition to retained earnings $5,100; dividends paid $1,500; interest
expense $4,500; tax rate 35 percent.
Calculating Total Cash Flows [LO4] Jetson Spacecraft Corp. shows the
following information on its 2009 income statement: sales $196,000; costs
$104,000; other expenses $6,800; depreciation expense $9,100; interest
expense $14,800; taxes $21,455; dividends $10,400. In addition, you’re
told th...
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Add to cartCalculating Total Cash Flows [LO4] Jetson Spacecraft Corp. shows the
following information on its 2009 income statement: sales $196,000; costs
$104,000; other expenses $6,800; depreciation expense $9,100; interest
expense $14,800; taxes $21,455; dividends $10,400. In addition, you’re
told th...
Calculating Total Cash Flows [LO4] Given the information for Maria’s Tennis
Shop, Inc., in Problems 11 and 12, suppose you also know that the fi rm’s net
capital spending for 2009 was $940,000, and that the fi rm reduced its net working
capital investment by $85,000. What was the fi rm’s 2009 ...
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Add to cartCalculating Total Cash Flows [LO4] Given the information for Maria’s Tennis
Shop, Inc., in Problems 11 and 12, suppose you also know that the fi rm’s net
capital spending for 2009 was $940,000, and that the fi rm reduced its net working
capital investment by $85,000. What was the fi rm’s 2009 ...
Cash Flow to Stockholders [LO4] The 2008 balance sheet of Maria’s Tennis
Shop, Inc., showed $740,000 in the common stock account and $5.2 million in the
additional paid-in surplus account. The 2009 balance sheet showed $815,000 and
$5.5 million in the same two accounts, respectively. If the compan...
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Add to cartCash Flow to Stockholders [LO4] The 2008 balance sheet of Maria’s Tennis
Shop, Inc., showed $740,000 in the common stock account and $5.2 million in the
additional paid-in surplus account. The 2009 balance sheet showed $815,000 and
$5.5 million in the same two accounts, respectively. If the compan...
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...
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Add to cartCash 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...
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Add to cartCalculating 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 ...
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Add to cartCalculating 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?
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Add to cartCalculating 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?
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Add to cartTax 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.
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Add to cartCalculating 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...
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Add to cartMarket 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?
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Add to cartPer-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?
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Add to cartDividends 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?
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Add to cartBuilding 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?
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Add to cartBuilding 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...
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Add to cartEarnings 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?
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Add to cartEnterprise 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?
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Add to cartFirm 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?
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Add to cartCash 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?
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Add to cartNet 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?
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Add to cartOperating 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?
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Add to cartCash 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?
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Add to cartBook 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.
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Add to cartOperating 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?
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Add to cartBook 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?
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Add to cartAccounting 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.
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Add to cartLiquidity [LO1] What does liquidity measure? Explain the trade-off a fi rm faces
between high liquidity and low liquidity levels.
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