Question

MUST SHOW ALL WORK 1.1 Rodgers, Inc. has current assets of $30,000, net fixed assets of $60,000, current liabilities of $16,000, and long-term debt of $54,000. Rodgers, Inc. also has sales of $440,000, costs of $210,000, depreciation expense of $63,000, interest expense of $38,000, and a tax rate of 40%. Also, suppose that the company paid out $30,000 in cash dividends and has 20,000 shares of common stock outstanding. a. What is the value of shareholders' equity? b. How much is net working capital? c. What is the net income for this firm? d. What is the addition to retained earnings? 1.2 Johnson Systems, Inc. purchased new cloaking machinery three years ago for $5 million. The machinery can be sold today to a competing company for $3.5 million. Johnson System's current balance sheet shows net fixed assets of $2,000,000, current liabilities of $750,000, and net working capital of $650,000. If all the current assets were liquidated today, the company would receive $1.50 million in cash. a. What is the book value of Johnson System's assets today? b. What is the market value of Johnson System's assets today?

Answer 1

a) Value of sharehodlers equity is = (Total assets - Total liabilities) Total asssets = Current assets + Fixed assets = (30000+60000) = $ 90,000/ Total liabilities = Current liabilities + Long term debt = (16000+54000) = $ 70,000/. Value of sharehodlers equity is = (90000-70000) Value of sharehodlers equity is - $ 20,000/. b) Net working capital = Total current assets - Total current liabilities Net working capital = (30000-16000) Net working capital = $ 14,000/. c) Net Income = Sales - Costs - Depreciation - Interest - Tax Net Income = ((440000-210000-63000-38000)-(440000-210000-63000-38000)*40%)) Net Income = $ 77,4000/. d) Addition to retained earnings is = (Net Income - Dividends) Addition to retained earnings is (77400-30000) Addition to retained earnings is - $ 47,400/. 1.2 a) Book value of assets = Balance sheet value of assets Book value of assets = Value of net fixed assets + Value of current assets Current assets = Working capital + Current liabilities Current assets = 650000+750000) Current assets = $ 1,400,000/- Book value of assets = (2000000+1400000) Book value of assets = $3,400,000/. 1.2 b) Market value of assets = Liquidation value of current assets + Market value of machinery Market value of assets = (1.50 Million + 3.50 Million) Market value of assets = $5,000,000/.