@PROFDOCDIGITALLIBRARIES
TEST BANK
Corporate Finance: Core Principles and Applications
AP
Bradford D. Jordan & Stephen A. Ross
7th Edition
EX
Chapter 1-21 Answers are at the End of Each Chapter
SO
LU
TI
O
N
S
,@PROFDOCDIGITALLIBRARIES
Chapter 1
Student name:
1) A firm has common stock of $86, paid-in surplus of $230, total liabilities of $390, current
assets of $350, and net fixed assets of $560. What is the amount of the shareholders' equity?
A) $910
B) $510
C) $520
AP
D) $170
E) $706
2) Recently, the owner of Martha's Wares encountered severe legal problems and is trying to
EX
sell her business. The company built a building at a cost of $1,190,000 that is currently
appraised at $1,390,000. The equipment originally cost $670,000 and is currently valued at
$417,000. The inventory is valued on the balance sheet at $360,000 but has a market value of
only one-half of that amount. The owner expects to collect 97 percent of the $200,200 in
accounts receivable. The firm has $11,200 in cash and owes a total of $1,390,000. The legal
SO
problems are personal and unrelated to the actual business. What is the market value of this
firm?
A) $1,182,594
B) $802,394
C) $597,000
LU
D) $1,542,594
E) $982,394
3) Ivan's, Incorporated, paid $500 in dividends and $595 in interest this past year. Common
TI
stock increased by $205 and retained earnings decreased by $131. What is the net income for
the year?
A) $369
B) $800
O
C) $595
D) $964
E) $500
N
S
,@PROFDOCDIGITALLIBRARIES
4) The tax rates for a particular year are shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
What is the average tax rate for a firm with taxable income of $124,013?
AP
A) 39.00%
B) 36.39%
C) 20.00%
D) 27.98%
E) 25.49%
EX
5) The tax rates are as shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
SO
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
Your firm currently has taxable income of $81,700. How much additional tax will you owe if
you increase your taxable income by $22,900?
LU
A) $7,626
B) $8,016
C) $8,931
D) $7,636
E) $7,786
TI
6) Your firm has net income of $371 on total sales of $1,460. Costs are $800 and depreciation is
O
$130. The tax rate is 30 percent. The firm does not have interest expenses. What is the
operating cash flow?
A) $501
N
B) $660
C) $901
S
D) $530
E) $371
, @PROFDOCDIGITALLIBRARIES
7) Teddy's Pillows had beginning net fixed assets of $477 and ending net fixed assets of $562.
Assets valued at $325 were sold during the year. Depreciation was $54. What is the amount
of net capital spending?
A) $464
B) $139
C) $85
D) $31
AP
E) $291
8) At the beginning of the year, a firm has current assets of $332 and current liabilities of $236.
At the end of the year, the current assets are $501 and the current liabilities are $276. What is
EX
the change in net working capital?
A) $209
B) $0
C) −$129
D) $129
SO
E) $169
9) At the beginning of the year, long-term debt of a firm is $278 and total debt is $324. At the
end of the year, long-term debt is $254 and total debt is $334. The interest paid is $20. What
LU
is the amount of the cash flow to creditors?
A) −$44
B) $24
C) $44
D) −$24
TI
E) $20
O
10) Peggy Grey's Cookies has net income of $400. The firm pays out 30 percent of the net
income to its shareholders as dividends. During the year, the company sold $85 worth of
common stock. What is the cash flow to stockholders?
N
A) $205.00
B) $35.00
S
C) $280.00
D) $94.50
E) $120.00
TEST BANK
Corporate Finance: Core Principles and Applications
AP
Bradford D. Jordan & Stephen A. Ross
7th Edition
EX
Chapter 1-21 Answers are at the End of Each Chapter
SO
LU
TI
O
N
S
,@PROFDOCDIGITALLIBRARIES
Chapter 1
Student name:
1) A firm has common stock of $86, paid-in surplus of $230, total liabilities of $390, current
assets of $350, and net fixed assets of $560. What is the amount of the shareholders' equity?
A) $910
B) $510
C) $520
AP
D) $170
E) $706
2) Recently, the owner of Martha's Wares encountered severe legal problems and is trying to
EX
sell her business. The company built a building at a cost of $1,190,000 that is currently
appraised at $1,390,000. The equipment originally cost $670,000 and is currently valued at
$417,000. The inventory is valued on the balance sheet at $360,000 but has a market value of
only one-half of that amount. The owner expects to collect 97 percent of the $200,200 in
accounts receivable. The firm has $11,200 in cash and owes a total of $1,390,000. The legal
SO
problems are personal and unrelated to the actual business. What is the market value of this
firm?
A) $1,182,594
B) $802,394
C) $597,000
LU
D) $1,542,594
E) $982,394
3) Ivan's, Incorporated, paid $500 in dividends and $595 in interest this past year. Common
TI
stock increased by $205 and retained earnings decreased by $131. What is the net income for
the year?
A) $369
B) $800
O
C) $595
D) $964
E) $500
N
S
,@PROFDOCDIGITALLIBRARIES
4) The tax rates for a particular year are shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
What is the average tax rate for a firm with taxable income of $124,013?
AP
A) 39.00%
B) 36.39%
C) 20.00%
D) 27.98%
E) 25.49%
EX
5) The tax rates are as shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
SO
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
Your firm currently has taxable income of $81,700. How much additional tax will you owe if
you increase your taxable income by $22,900?
LU
A) $7,626
B) $8,016
C) $8,931
D) $7,636
E) $7,786
TI
6) Your firm has net income of $371 on total sales of $1,460. Costs are $800 and depreciation is
O
$130. The tax rate is 30 percent. The firm does not have interest expenses. What is the
operating cash flow?
A) $501
N
B) $660
C) $901
S
D) $530
E) $371
, @PROFDOCDIGITALLIBRARIES
7) Teddy's Pillows had beginning net fixed assets of $477 and ending net fixed assets of $562.
Assets valued at $325 were sold during the year. Depreciation was $54. What is the amount
of net capital spending?
A) $464
B) $139
C) $85
D) $31
AP
E) $291
8) At the beginning of the year, a firm has current assets of $332 and current liabilities of $236.
At the end of the year, the current assets are $501 and the current liabilities are $276. What is
EX
the change in net working capital?
A) $209
B) $0
C) −$129
D) $129
SO
E) $169
9) At the beginning of the year, long-term debt of a firm is $278 and total debt is $324. At the
end of the year, long-term debt is $254 and total debt is $334. The interest paid is $20. What
LU
is the amount of the cash flow to creditors?
A) −$44
B) $24
C) $44
D) −$24
TI
E) $20
O
10) Peggy Grey's Cookies has net income of $400. The firm pays out 30 percent of the net
income to its shareholders as dividends. During the year, the company sold $85 worth of
common stock. What is the cash flow to stockholders?
N
A) $205.00
B) $35.00
S
C) $280.00
D) $94.50
E) $120.00
