1.

All else equal, the internal growth rate increases when the:
(a) retention ratio decreases.
(b) dividend payout ratio increases.
(c) net income decreases.
(d) total assets decrease.
(e) profit margin decreases.

2. Which of the following can affect a firm's sustainable rate of growth?

I. total asset turnover
II. profit margin
III. dividend policy
IV. equity multiplier
(a) III only
(b) I and III only
(c) II, III, and IV only
(d) I, II, and IV only
(e) I, II, III, and IV

3. The CFO of Mulroney Brothers has suggested that the company should issue $300 million worth
of common stock and use the proceeds to reduce some of the company's outstanding debt.
Assume that the company adopts this policy, and that total assets and operating income (EBIT)
remain the same. The company's tax rate will also remain the same. Which of the following will
occur: phát hành cổ phiếu  NI tăng  phải đóng thuế nhiều hơn
(a) The company's net income will increase.
(b) The company's taxable income will fall.
(c) The company will pay less in taxes.
(d) All of the answers above are correct.
(e) Answers b and c are correct.

4. The internal growth rate of a firm is best described as the:

(a) minimum growth rate achievable if the firm does not pay out any cash dividends.
(b) minimum growth rate achievable if the firm maintains a constant equity multiplier.
(c) maximum growth rate achievable without external financing of any kind.
(tốc độ tăng trưởng tối đa có thể đạt được mà không cần tài trợ bên ngoài dưới bất kỳ hình thức
nào.)
(d) maximum growth rate achievable without using any external equity financing while
maintaining a constant debt-equity ratio.
(e) maximum growth rate achievable without any limits on the level of debt financing.
5. MM Prop. I states that in a perfect capital market, the total value of a firm is equal to the market
value of the __________ generated by its assets
(a) earnings after taxes (EAT = EBT – Thuế TNDN (T))
(b) earnings after interest
 (c) cash flows after taxes
(d) free cash flows (dùng để tra cho NĐT)

7. Last year Aldrin Co. had negative net cash flow, yet its cash on the balance sheet increased.
What could explain these events?

a. Aldrin issued long term debt. ( phát hành nợ  NCF âm)

b. Aldrin repurchased some of its common stock. ( mua lại cp của mình  không còn nợ nữa 
NCF tăng)
c. Aldrin sold some of its assets. (bán TS  money tăng nhưng khấu hao giảm  NCF giảm)
d. Statements a and b are correct.
e. Statements a and c are correct.

8. Last year, Blanda Brothers had positive ( net cash flow- số tiền ban đầu sau khi trừ số đã chi tiêu),
yet cash on the balance sheet decreased. Which of the following could explain the company’s
financial performance?

a.The company issued new common stock (NCF giảm , cash tăng)

.b.The company issued new long-term debt (NCF giảm)

.c.The company sold off some of its assets (Cash tăng)

.d.The company purchased a lot of new fixed assets. ( NCF tăng, cash giảm vì tài sản không tương
đương tiền tăng)

e.The company eliminated its dividend. ( NCF giảm

9. Last year, Sewickley Shoes had negative net cash flow; however, cash on its balance sheet increased.
Which of the following could explain this?

a.The company repurchased some of its common stock. (cash giảm

b.The company had large depreciation and amortization expenses. ( NCF tăng

c.The company issued a large amount of long-termdebt. ( Cash tăng, NCF giảm

d.The company dramatically increased its capital expenditures.

e.All of the statements above are correct.

10. Which of the following factors could explain why last year Cleaver Energy had negative net cash
flow, but the cash on its balance sheet increased?

a.The company paid a large dividend. (cash giảm)

b.The company had large depreciation and amortization expenses. (NCF tăng
c.The company repurchased common stock. ( NCF tăng, nhưng cash giảm0

d.The company issued new debt. (NCF giảm, cash tăng)

e.The company made a large investment in new plant and equipment ( NCF tăng, cash giảm)

11. Analysts who follow Sierra Nevada Inc. recently noted that, relative to the previous year, the
company’s net cash flow was larger but cash on the firm’s balance sheet had declined. What factors
could explain these changes?

a.The company sold a division and received cash in return.

b.The company cut its dividend.

c.The company made a large investment in new plant and equipment

.d.Statements a and b are correct.

e.Statements b and c are correct.

12. A stock analyst has acquired the following information for Palmer Products

:Retained earnings (Lợi nhuận giữ lại = lợi nhuân giữ lại ban đầu + thu nhập ròng – cổ tức) on the year-
end 2001 balance sheet was $700,000.

Retained earnings on the year-end 2002 balancesheet was $320,000.

The company does not pay dividends.

The company’s depreciation expense is its only non-cash expense.

The company has no non-cash revenues.

The company’s net cash flow for 2002 was $150,000.On the basis of this information, which of the
following statements is most correct?

a.Palmer Products had negative net income in 2002.

b.Palmer Products had positive net income in 2002, but it was less than its net income in 2001.

c.Palmer Products’ depreciation expense in 2002 was less than $150,000.

d.Palmer Products’ cash on the balance sheet at the end of 2002 must be lower than the cash it had on
its balance sheet at the end of 2001.

e.Palmer Products’ net cash flow in 2002 must be higher than its net cash flow in 2001.

13. Holmes Aircraft recently announced an increase in its net income, yet its net cash flow declined
relative to last year. Which of the following could explain this performance?
NI= EBIT –Interest- TAX

a.The company’s interest expense increased. (I tăng  NI giảm)

b.The company’s depreciation and amortization expenses declined. ( DA giảm  NCF giảm

c.The company’s operating income declined. (thu nhập từ hoạt động tăng  NCF tăng)

d.All of the statements above are correct.

e.None of the statements above is correct.

14. Kramer Corporation recently announced that its net income was lower than last year. However,
analysts estimate that the company’s net cash flow increased. What factors could explain this
discrepancy?

a.The company’s depreciation and amortization expenses increased. (DA tăng  NCF tăng

b.The company’s interest expense declined. ( chi phí lãi vay tăng  NI tăng  chưa chắc NCF tăng)

c.The company had an increase in its noncash revenues. ( không có dòng tiền vào từ HĐSX)

d.Statements a and b are correct.

e.Statements b and c are correct.

15. Last year, Owen Technologies reported negative net cash flow and negative free cash flow.
However, its cash on the balance sheet increased. Which of the following could explain these changes
in its cash position? (NCF giảm, FCF giảm, cash tăng

a.The company had a sharp increase in its depreciation and amortization expenses. (DA tăng  NCF
tăng

b.The company had a sharp increase in its inventories. (hàng tồn kho tăng  DA tăng  NCF tăng cash
giảm)

c.The company issued new common stock. ( phát hành cổ phiếu tăng  tiền tăng  NCF giảm, FCF
giảm)

d.Statements a and b are correct.

e.Statements a and c are correct.

16. Which of the following items is included as part of a company’s current assets?

a.Accounts payable.

b.Inventory.
c.Accounts receivable.

d.Statements b and c are correct.

e.All of the statements above are correct.

17. Which of the following items can be found on a firm’s balance sheet listed as a current asset?

a.Accounts receivable.

b.Depreciation

.c.Accrued wages.

d.Statements a and b are correct.

e.Statements a and c are correct.

18. On its 2001 balance sheet, Sherman Books had equal to $510 million. On its 2002 balance
sheet, retained earnings were also equalto $510 million. Which of the following statements is most
correct?

a.The company must have had net income equal to zero in 2002

.b.The company did not pay dividends in 2002

.c.If the company’s net income in 2002 was $200 million, dividends paid must have also equaled $200
million. (beginning RE +(NI –Dividends) = ERE)

d.If the company lost money in 2002, they must have paid dividends

.e.None ofthe statements above is correct.

19. Below is the equity portion (in millions) of the year-end balance sheet that Glenn Technology has
reported for the last two years:2002 2001Preferred stock $ 80$ 80Common stock 2,0001,000
Retained earnings2,0002,340Total equity$4,080$3,420Glenn does not pay a dividend to its common
stockholders. Which of the following statements is most correct?

a.Glenn issued preferred stock in both 2001 and 2002. (sai, preferred stock không tăng)

b.Glenn issued common stock in 2002. (đúng vì common stock tăng)

c.Glenn had positive net income in both 2001 and 2002, but the company’s net income in 2002 was
lower than it was in 2001. ( phát hành cổ phiếu  NCF giảm  NI 2002 tăng so với 2001)

d.Statements b and c are correct.

e.None of the statements above is correct.

20. All else equal, which of the following actions will increase the amount of cash on a company’s
balance sheet?

a.The company issues new common stock.

b.The company repurchases common stock.

c.The company pays a dividend.

d.The company purchases a new piece of equipment.

e.All of the statements above are correct.

21. 5.Below are the 2001 and 2002 year-end balance sheets for Kewell Boomerangs:Assets:2002
2001Cash$ 100,000$ 85,000Accounts receivable432,000350,000Inventories1,000,000700,000Total
current assets$1,532,000$1,135,000Net fixed assets3,000,0002,800,000Total
assets$4,532,000$3,935,000Liabilities and equity:Accounts payable$ 700,000$ 545,000Notes
payable800,000900,000Total current liabilities$1,500,000$1,445,000Long-term
debt1,200,0001,200,000Common stock1,500,0001,000,000Retained earnings332,000290,000Total
common equity$1,832,000$1,290,000Total liabilities and equity$4,532,000$3,935,000Kewell
Boomerangs has never paid a dividend on its common stock. Kewell issued $1,200,000 of long-term
debt in 1997. This debt was non-callable and is scheduled to mature in 2027. As of the end of 2002,
none of the principal on this debt has been repaid. Assume that 2001 and 2002 sales were the same in
both years. Which of the following statements is most correct?

a.Kewell had negative net income in 2002

b.Kewell issued new common stock in 2002.

c.Kewell issued long-term debt in 2002.

d.Statements a and b are correct.e.All of the statements above are correct.

22. Which of the following are likely to occur if Congress passes legislation that forces Carter
Manufacturing to depreciate their equipment over a longer time period? DA tăng  NI tăng 

a.The company’s physical stock of assets would increase.

b.The company’s reported net income would decline.

c.The company’s cash position would decline.

d.All of the statements above are correct.

e.Statements b and c are correct.

23. Assume that a company currently depreciates its fixed assets over 7 years. Which of the
following would occur if a tax law change forced the company to depreciate its fixed assets over 10
years instead? ( thời gian DA tăng  thuế tăng  NI tăng)

a.The company’s tax payment would increase.

b.The company’s cash position would increase.

c.The company’s net income would increase.

d.Statements a and c are correct.

e.Statements b and c are correct.

24. Keaton Enterprises is a very profitable company, which recently purchased some equipment. It
plans to depreciate the equipment on a straight-line basis over the next 10 years. Congress, however, is
considering a change in the Tax Codethat would allow Keaton to depreciate the equipment on a
straight-line basis over 5 years instead of 10 years.

If Congress were to change the law, and Keaton does decide to depreciate the equipment over 5
years, what effect would this change have on thecompany’s financial statements for the coming
year? (Note that the change in the law would have no effect on the economic or physical value of the
equipment.)

a.The company’s net income would decline.

b.The company’s net cash flow would decline. (tăng)

c.The company’s tax payments would decline.

d.Statements a and c are correct.

e.All of the statements above are correct.

25. Congress recently passed a provision that will enable Piazza Cola to double its depreciation
expense for the upcoming year. The new provision will have no effect on the company’s sales
revenue. Prior to the new provision, Piazza’s net income was forecasted to be $4 million. The
company’s tax rate is 40 percent. Which of the following best describes the impact that this provision
will have on Piazza’s financial statements? ( DA tăng gấp đôi  THUẾ GIẢM, NI GIẢM  NCF TĂNG)

a.The provision will increase the company’s net income.

b.The provision will reduce the company’s net cash flow.

c.The provision will increase the company’s tax payments.

d.All of the statements above are correct.

e.None of the statements above is correct.

26. Armstrong Inc. is a profitable corporation with a 40 percent corporate tax rate. The company is
deciding between depreciating the equipment it purchased this year on a straight-line basis over
five years or over three years. Changing the depreciation schedule will have no impact on the
equipment’s economic value. If Armstrong chooses to depreciate the equipment over three years,
which of the following will occur next year, relative to what would have happened, if it had depreciated
the equipment over five years?

a.The company will have a lower net income.

b.The company will pay less in taxes.

c.The companywill have a lower net cash flow.

d.Statements a and b are correct.

e.All of the statements above are correct.

27. Which of the following statements is most correct?

a.Accounts receivable show up as current liabilities on the balance sheet. (current assets

b.Dividends paid reduce the net income that is reported on a company’s income statement. ( không liên
quan vì NI liên quan đến hoạt động sản xuất)

c.If a company pays more in dividends than it generates in net income, its balance of retained
earnings reported on the balance sheet will fall.

d.Statements a and b are correct.

e.All of the statements above are correct.

28. Haskell Motors’ common equity on the balance sheet totals $700 million, and the company has 35
million shares of common stock outstanding. Haskell has significant growth opportunities. Its
headquarters has a book value of $5 million, but its market value is estimated to be $10
million. Over time, Haskell has issued outstanding debt that has a book value of $10million and a
market value of $5 million. Which of the following statements is most correct?

a.Haskell’s book value per share is $20.

b.Haskell’s market value per share is probably less than $20.

c.Haskell’s market value per share is probably greaterthan $20.

d.Statements a and b are correct.

e.Statements a and c are correct.

29. Analysts who follow Cascade Technology recently noted that, relative to the previous year, the
company’s operating income (EBIT) and net income had declined but its operating cash flow had
increased. What could explain these changes?

a.The company’s depreciation and amortization expenses increased. Da tăng

b.The company’s interest expense decreased. Giả

c.The company’stax rate increased.

d.Statements a and b are correct.

e.All of the statements above are correct.

30. Which of the following statements is most correct?

a.Actions that increase net income will always increase net cash flow.

b.One way to increase EVA is to maintain the same operating income with less capital.

c.One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital
is free.

d.Statements a and b are correct.

e.Statements a and c are correct.

31. 26.Solo Company has been depreciating its fixed assets over 15 years. It is now clear that these
assets will only last a total of 10 years. Solo’s accountants have encouragedthe firm to revise its annual
depreciation to reflect this new information. Which of the following would occur as a result of this
change?

a.The company’s earnings per share would decrease.

b.The company’s cash position would increase

c.The company’s EBIT would increase.

d.Statements a and b are correct.

e.All of the statements above are correct.

32. 27.A start-up firm is making an initial investment in new plant and equipment. Currently,
equipment is depreciated on a straight-line basis over 10 years. Assume that Congress is considering
legislation that will allow the corporation to depreciate the equipment over 7 years. If the legislation
becomes law, and the firm implements the 7-year depreciation basis, which of the following will occur?

a.The firm’s tax payments will increase.

b.The firm’s net income will increase.

c.The firm’s taxable income will increase.

d.The firm’s net cash flow will increase.

e.The firm’s operating income (EBIT) will increase.

33. The CFO of Mulroney Brothers has suggested that the company should issue $300 million worth of
common stock and use the proceeds to reduce some of the company’s outstanding debt. Assume
that the company adopts this policy, and that total assets and operating income (EBIT) remain
the same. The company’s tax rate will also remain the same. Which of the following will occur?

a.The company’s net income will increase.

b.The company’s taxable income will fall.

c.The company will pay less in taxes.

d.Statements b and c are correct.

e.All of the statements above are correct.

34. 9.An analyst has acquired the following information regarding Company A and Company B:

Company A has a higher net cash flow than Company B.

Company B has higher net income than Company A

Company B has a higher operating cash flow than Company A.

The companies have the same tax rate, investor-supplied operating capital, and cost ofcapital
(WACC).Assume that non-cash revenues equal zero for both companies, and depreciation is the
only non-cash expense for both companies. Which of the following statements is most correct?

a.Company A has a higher depreciation expense than Company B.

b.Company A has a lower level of operating income (EBIT) than Company B.

c.Company A has a lower EVA than Company B.

d.Statements a and b are correct.

e.All of the statements above are correct.

35. Assume that the depreciation level used for tax and accounting purposes equals the true economic
depreciation. Which of the following statements is most correct? (DA kế toán = DA thực)

a.If a company’s net income doubles, its Economic Value Added (EVA) will more than double.
b.If a company’s depreciation expense declines its net income will fall but its Economic Value Added
(EVA) will increase.

c.A firm can increase its EVA even if its operating income falls.

d.Statements a and b are correct.

e.Statements a and c are correct.

36. At the beginning of the year, Gonzales Corporation had $100,000 in cash. The company undertook a
major expansion during this same year. Looking at its statement of cash flows, you see that the net cash
provided by its operations was $300,000 and the company’s investing activities required cash
expenditures of $800,000. The company’s cash position at the end of the year was $50,000. What was
the net cash provided by the company’s financing activities? ( 800 – (100+300)+50

a.$350,000

b.$400,000

c.$300,000

d.$450,000

e.$500,000

37. At the end of 2001, Lehnhoff Inc. had $75 million in cash (có) on its balance sheet. During 2002, the
following events occurred:

The cash flow from Lehnhoff’s operating activities totaled $325 million. (vào)

Lehnhoff issued $500 million in common stock( (vào)

.Lehnhoff’s notes payable decreased by $100 million. (ra)

Lehnhoff purchased fixed assets totaling $600 million. (ra)

How much cash did Lehnhoff Inc. have on its balance sheet at the end of 2002?

a.$ 50 million

b.$ 100 million

c.$ 200 million

d.$ 400 million

e.$1,400 million
38. At the end of 2001, Scaringe Medical Supply had $275 million of retained earnings on its balance
sheet. During 2002, Scaringe paid a per-share dividend of $0.25 and produced earnings per share of
$0.75. Scaringe has 20 million shares of stock outstanding. What was the level of retained earnings
that Scaringe had on its balancesheet at the end of 2002? ( 20x(0.75-0.25)+275)

a.$255 million

b.$265 million

c.$275 million

d.$285 million

e.$295 million

39. In its recent income statement, Smith Software Inc. reported $25 million of net income, andin its
year-end balance sheet, Smith reported $405 million of retained earnings. The previous year, its
balance sheet showed $390 million of retained earnings. What were the total dividends paid to
shareholders during the most recent year? )390+(25-X)=405  X=10

a.$ 3,500,000

b.$ 5,000,000

c.$ 6,750,000

d.$10,000,000

e.$11,250,000

40. Cox Corporation recently reported an EBITDA of $22.5 million and $5.4 million of net income.
The company has $6 million interest expense and the corporate tax rate is 35 percent. What was
the company’s depreciation and amortization expense?

a.$ 4,333,650

b.$ 8,192,308

c.$ 9,427,973

d.$11,567,981

e.$14,307,692

41. A firm has notes payable of $1,546,000, long-term debt of $13,000,000, and total interest
expense of $1,300,000. If the firm pays 8 percent interest on its long-term debt, what interest
rate does it pay on its notes payable?
a.8.2%

b.13.1%

c.16.8%

d.18.0%

e.15.3%

42. Garfield Industries is expandingits operations throughout the Southeast United States. Garfield
anticipates that the expansion will increase sales by $1,000,000 and increase operating costs
(excluding depreciation and amortization) by $700,000. Depreciation and amortization expenses
will rise by $50,000, interest expense will increase by $150,000, and the company’s tax rate will
remain at 40 percent. If the company’s forecast is correct, how much will net income increase or
decrease, as a result of the expansion?

a.No change

b.$ 40,000 increase

c.$ 60,000 increase

d.$100,000 increase

e.$180,000 increase

43. An analyst has collected the following information regarding Gilligan Grocers:

Earnings before interest and taxes (EBIT) = $700 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) = $850 million

.Interest expense = $200 million.

The corporate tax rate is 40 percent.

Depreciation is the company’s only non-cash expense or revenue.

What is the company’s net cash flow?

a.$850 million

b.$650 million

c.$570 million

d.$450 million (
e.$500 million

44. Brooks Sisters’ operating income (EBIT) is $500,000. The company’s tax rate is 40 percent, and its
operating cash flow is $450,000. The company’s interest expense is $100,000. What is the
company’s net cash flow? (Assume that depreciation is the only non-cash item in the firm’s financial
statements.)

a.$ 390,000 ( DA= OCF – EBIT(1-40%) , NI =240000)  NCF = 150000+240000=390.000

b.$ 550,000

c.$ 600,000

d.$ 950,000

e.$1,050,000

45. Casey Motors recently reportedthe following information:Net income = $600,000.Tax rate =
40%.Interest expense = $200,000.Total investor-supplied operating capital employed = $9
million.After-tax cost of capital = 10%.What is the company’s EVA?

a.-$300,000

b.-$180,000

(EBIT =1200.000, TOTAL=9M, After tax=10%)  EVA= 1200.000(1-40%)-(9M*10%)=-180.000

c.$ 0

d.$200,000

e.$400,000

46. Hebner Housing Corporation has forecast the following numbers for this upcoming year:

Sales = $1,000,000.

Cost of goods sold = 600,000.

Interest expense = 100,000

.Net income = 180,000.

46. The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60
percent of its sales. That is, if the company’s sales were to increase to $1.5 million, its cost of
goods sold would increase to $900,000.
The company’s CEO is unhappy with the forecast and wants the firm to achieve a net income
equal to $240,000. In order to achieve this level of net income, what level of sales will the
company have to achieve? Assume that Hebner’s interest expense remains constant.

a.$ 400,000

b.$ 500,000

c.$ 750,000

d.$1,000,000

e.$1,250,000

47. Ozark Industries reported net income of $75 million in 2002. The company’s corporate tax
rate was 40 percent and its interest expense was $25 million. The company had $500 million in sales
and its cost of goods sold was $350 million. Ozark’s goal is for its net income to increase by 20 percent
(to $90 million) in 2003. It forecasts that the tax rate will remain at 40 percent, interest expense will
increase by 40 percent, and cost of goods sold will remain at 70 percent of sales. What level
of sales (to the closest million) will Ozark have to produce in 2003 in order to meet its goal for net
income?

EBT 2002 = 75/ (1-40%)= 125 EBT 2003= 90/(1-40%)=150 (interest 25*(1+40%)=35)

EBIT 2002= 125+25= 150 EBIT 2003= 150+35=185

COGS =350 COGS= 70% *SALES

SALES = 500 SALES= EBIT /(1-30%)

a.$550 million

b.$583 million

c.$600 million

d.$617 million

e.$650 million

48. McGwire Aerospace expects to have net cash flow of $12 million. The company forecasts
that its operating costs excluding depreciationand amortization will equal 75 percent of the
company’s sales. Depreciation and amortization expenses are expected to be $5 million and the
company has nointerest expense. All of McGwire’s sales will be collected in cash, costs other than
depreciation and amortization will be paid in cash during the year, and the company’s tax rate is 40
percent. What is the company’s expected sales?
a.$ 68.00 million

b.$ 66.67 million

c.$ 46.67 million

d.$133.33 million

e.$ 26.67 million

49. Sanguillen Corp. had retained earnings of $400,000 on its 2001 balance sheet. In 2002, the
company’s earnings per share (EPS) were $3.00 and its dividends paid per share (DPS) were $1.00. The
company has 200,000 shares of common stock outstanding. What will be the level of retained earnings
on the company’s 2002 balance sheet?

a.$400,000

b.$500,000

c.$600,000

d.$700,000

e.$800,000

50. New Hampshire Services reported $2.3 million of retained earnings on its 2001 balance sheet. In
2002, the company lost money--its net income was -$500,000 (negative $500,000). Despitethe loss, the
company still paid a $1.00 per share dividend. The company’s earnings per share for 2002 were -$2.50
(negative $2.50). What was the level of retained earnings on the company’s 2002 balance sheet?

a.$1.2 million

b.$1.6 million

c.$1.8 million

d.$2.6 million

e.$2.8 million

51. Whitehall Clothiers had $5,000,000 of retained earnings on its balance sheet at the end of 2001.
One year later, Whitehall had $6,000,000 of retained earnings on its balance sheet. Whitehall has one
million shares of common stock outstanding, and it paid a dividend of $0.80 per share in 2002. What
was Whitehall’s earnings per share in 2002?

a.$0.80

b.$1.00
c.$1.80

d.$5.00

e.$6.00

52. New Mexico Lumber recently reported that its earnings per share were $3.00. The company
has 400,000 shares of common stock outstanding, its interest expense is $500,000, and its corporate
tax rate is 40 percent. What is the company’s operating income (EBIT)?

NI= EPS * 400000= 1.200.000

EBT= NI/(1-40%)= 2.000.000

EBIT= EBT + INTEREST EXPENSE = 2.500.000

a.$ 980,000

b.$1,220,000

c.$2,000,000

d.$2,500,000

e.$3,500,000

53. Cochrane, Inc. had $75,000 in cash on the balance sheet at the end of 2001. At year-end
2002, the company had $155,000 in cash. We know cash flow from operating activities totaled
$1,250,000 and cash flow from long-term investing activities totaled -$1,000,000. Furthermore,
Cochrane issued $250,000 in long-term debt last year to fund new projects, increase liquidity,
and to buy back some common stock. If dividends paid to common stockholders equaled
$25,000, how much common stock did Cochrane repurchase last year? (Assume that the only
financing activities in which Cochrane engaged involved long-term debt, payment of common dividends,
and common stock.)

a.$ 55,000

b.$105,000

c.$205,000

d.$255,000

e.$395,000

54. A stock market analyst has forecasted the following year-end numbers for Raedebe Technology:

Sales$70 million
EBITDA$20 million

Depreciation$ 7 million

Amortization$ 0

The company’s tax rate is 40 percent. The company does not expect any changes in its net operating
working capital. This year the company’s planned gross capital expenditures will total $12
million. (Gross capital expenditures represent capital expenditures before deducting depreciation.)
What is the company’s forecasted free cash flow for the year?

EBIT= EBITDA –DA =13

OCF= 13X(1-40%)+DA=14,8

FCF= 14,8- 12=2,8

a.$ 2.8 million

b.$ 7.0 million

c.$ 8.0 million

d.$12.8 million

e.$26.8 million

55. Last year, Sharpe Radios had a net operating profit after-taxes (NOPAT) of $7.8 million. Its EBITDA
was $15.5 million and net income amounted to $3.8 million. During the year, Sharpe Radios made
$5.5 million in net capital expenditures (that is, capital expenditures net of depreciation). Finally,
Sharpe Radios’ finance staff has concluded that the firm’s total after-tax capital costs were $5.9 million
and its tax rate was 40 percent

NOPACT=EBIT(1-40%)  EBIT =13

56 What is Sharpe Radios’ depreciation and amortization expense? KH= EBITDA – EBIT =15.5-13

a.$1.5 million

b.$2.1 million

c.$2.5 million

d.$3.3 million

e.$4.0 million

57.What is Sharpe Radios’ interest expense?

EBIT= EBT + interest expexnse= NI/(1-40%) + interest expense  interest expense= 6.67

a.$ 6.33 million

b.$ 6.67 million

c.$ 8.33 million

d.$ 9.17 million

e.$10.13million

58.What is Sharpe Radios’ free cash flow? FCF= EBIT (1-40%)-( net capital expenditures) = 2.3

a.$1.9 million

b.$2.3 million

c.$4.0 million

d.$4.8 million

e.$6.3 million

59. What is Sharpe Radios’ EVA? EVA= EBIT (1-40%)- total after-tax capital costs =1.9

a.$1.9 million

b.$2.3 million

c.$4.0 million

d.$7.2 million

e.$9.6 million

Laiho Industries recently reported the following information in its annual report:

Net income = $7.0 million.

NOPAT = $60 million.  EBIT= NOPAT/(1-40%) =100

EBITDA = $120 million

.Net profit margin = 5.0%.

Laiho has depreciation expense, but it does not have amortization expense. Laiho has $300 million
in operating capital, its after-tax cost of capital is 10 percent (that is, its WACC = 10%), and the firm’s
tax rate is 40 percent
60. What is Laiho’s depreciation expense? DA= EBITDA – EBIT= 120-100=20

a.$20.0 million

b.$30.0 million

c.$53.0 million

d.$60.0 million

e.$77.1 million

61.What is Laiho’s interest expense? EBIT= EBT + interest expexnse= NI/(1-40%) + interest expense

a.$60.0 million

b.$82.5 million

c.$88.3 million

d.$92.0 million

e.$95.0 million

62. What is Laiho’s sales?

a.$120.0 million

b.$140.0 million

c.$160.0 million

d.$180.0 million

e.$200.0 million

63. What is Laiho’s EVA ? EVA=EBIT(1-40%)-(WACC X operating capital)

?a.$30.0 million

b.$40.0 million

c.$50.0 million

d.$60.0 million

e.$70.0 million
 Beckham Broadcasting Company (BBC) has operating income (EBIT) of $2,500,000. The
company’s depreciation expense is $500,000 and it has no amortization expense. The
company is 100 percent equity financed (that is, its interest expense is zero). The
company has a 40 percent tax rate, and its net investment in operating capital is
$1,000,000
EBITDA= EBIT – DA= 2500000-500=2000000

68.What is BBC’s net income?

a.$1,000,000

b.$1,200,000

c.$1,250,000

d.$1,500,000

e.$1,550,000

69.What is BBC’s net operating profit after taxes (NOPAT)?

a.$1,000,000

b.$1,200,000

c.$1,250,000

d.$1,500,000

e.$1,550,000

70. What is BBC’s free cash flow?

a.$ 0

b.$ 500,000

c.$ 900,000

d.$1,000,000

e.$1,500,000