Question

Company Z has $90,000 of taxable income from its operations, $5,000 of interest income, and $30,000 of dividend income from preferred stock it holds in other corporations. Its corporate tax rate is 25%. What is Company Z’s tax liability? Assume a 50% dividend exclusion for tax on dividends.

a. 5100 b. 25,000   c. 60,100   d. 27500 e. 51,300

Houston Pumps recently reported $172,500 of sales, $140,500 of operating costs other than depreciation, and $9,250 of depreciation. The company had $35,250 of outstanding bonds that carry a 6.75% interest rate, and its federal-plus-state income tax rate was 25%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to spend $15,250 to buy new fixed assets and to invest $6,850 in net operating working capital. What was the firm's free cash flow?

a. 4213 b. 2286 c. 5354 d. 1860 e. 1978

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Answer 1

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v 1* 05:34 : ENG 26-01-2020 fix E F G H I J K - operating income interest income dividend income taxable income 90000 5000 15000 (30000 x 50%][ 50% exempt] 110000 B186 X А в 177 178 179 180 add 181 add 182 183 184 ANSWER:d: 185 186 187 188 189 190 191 Z'S TAX LIABILITY 27500 (110000 X 25%] 192 193 194 195 196 197 198 ... NAV HEDGE FUND MF | EV PE EPS DIV ABNORMAL deberk MARGIN MONEY marginal tax PB ROPI APV ROSS price quote EVA MVA | LEVERAS ... :

v ' 1* 05-21 ENG 26-01-20707 B670 в 649 650 653 654 PARTIAL INCOME STATEMENT 655 656 657 LESS 658 LESS 659 = 660 SALES OPERATING COSTS DEPRECIATION EBIT 172500 140500 9250 22750 661 662 663 664 ADD 665 LESS 666 LESS 667 ANS : a 668 669 CALCULATION OF FREE CASH FLOW EBIT*(1-t) DEPRECIATION INVESTMENT IN FIXED ASSETS INVESTMENT IN NOWC FREE CASH FLOW 17063 9250 15250 6850 4213 670 671 672 NPV OCF CASH FLOW STATW FCF ARM, MSI.confidenceINDEX CURRENCY LOAN CROSS OVER GM HPR AM TAX HEDGING MONEY MARKET GROS...