Fundamental Concepts of Corporate Finance – Misc. Problems

  

21)Personal After-TaxYieldAn investor recently purchased a corporate bond that yields 9%. The investor is inthe 36% combined federal and state tax bracket. What is the bonds after-tax yield?(22)Personal After-TaxYieldCorporate bonds issued by Johnson Corporation currently yield 8%. Municipalbonds of equal risk currently yield 6%. At what tax rate would an investor be indifferentbetween these two bonds?(23)Income StatementLittle Books Inc. recently reported $3 million of net income. Its EBIT was $6 million,and its tax rate was 40%. What was its interest expense? (Hint: Write out theheadings for an income statement and then fill in the known values. Then divide $3million net income by 1 ? T = 0.6 to find the pre-tax income. The difference betweenEBIT and taxable income must be the interest expense. Use this same procedureto work some of the other problems.)(25)Net Cash FlowKendall Corners Inc. recently reported net income of $3.1 million and depreciationof $500,000. What was its net cash flow? Assume it had no amortization expenseChapter 3 problems 7, 8, 9, 10 show all work please!(37)Current and QuickRatiosAce Industries has current assets equal to $3 million. The companys current ratio is1.5, and its quick ratio is 1.0. What is the firms level of current liabilities? What isthe firms level of inventories?Cash and marketable securities $ 100.00Fixed assets $ 283.50Sales $1,000.00Net income $ 50.00Quick ratio 2.0Current ratio 3.0DSO 40.55 daysROE 12%(38)Profit Margin and DebtRatioAssume you are given the following relationships for the Clayton Corporation:Sales/total assets 1.5Return on assets (ROA) 3%Return on equity (ROE) 5%Calculate Claytons profit margin and debt ratio.(39)Current and QuickRatiosThe Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities.Its initial inventory level is $375,000, and it will raise funds as additional notes payableand use them to increase inventory. How much can Nelsons short-term debt (notespayable) increase without pushing its current ratio below 2.0? What will be the firmsquick ratio after Nelson has raised the maximum amount of short-term funds?(310)Times-Interest-EarnedRatioThe Manor Corporation has $500,000 of debt outstanding, and it pays an interestrate of 10% annually: Manors annual sales are $2 million, its average tax rate is30%, and its net profit margin on sales is 5%. If the company does not maintain a TIE ratio of at least 5 to 1, then its bank will refuse to renew the loan and bankruptcywill result. What is Manors TIE ratio