The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.'s current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the Widget Co.'s assets today is _____ and the market value of those assets is _____.
Book value = ($725,000 + $1,375,000) + $2,500,000 = $4,600,000
Market value = $1,900,000 + $2,000,000 = $3,900,000 |
87.
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Boyer Enterprises had $200,000 in 2011 taxable income. What is the firm's average tax rate based on the rates shown in the following table?
Tax = .15($50,000) + .25($25,000) + .34($25,000) + .39($200,000 - $100,000) = $61,250
Average tax rate = $61,250/$200,000 = 30.63 percent |
88.
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Webster World has sales of $12,900, costs of $5,800, depreciation expense of $1,100, and interest expense of $700. What is the operating cash flow if the tax rate is 32 percent?
Earnings before interest and taxes = $12,900 - $5,800 - $1,100 = $6,000
Taxable income = $6,000 - $700 = $5,300 Tax = .32($5,300) = $1,696 Operating cash flow = $6,000 + $1,100 - $1,696 = $5,404 |
89.
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The Blue Bonnet's 2010 balance sheet showed net fixed assets of $2.2 million, and the 2011 balance sheet showed net fixed assets of $2.6 million. The company's income statement showed a depreciation expense of $900,000. What was the amount of the net capital spending for 2011?
Net capital spending = $2,600,000 - $2,200,000 + $900,000 = $1,300,000
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