# Problem set Essay

1062 Words5 Pages
1. EP Enterprises has the following income statement. How much net operating profit after taxes (NOPAT) does the firm have?

Sales

\$1,800.00

Costs

1,400.00

Depreciation

250.00

EBIT

\$ 150.00

Interest expense

70.00

EBT

\$ 80.00

Taxes (40%)

32.00

Net income

\$ 48.00

a.
\$81.23

b.
\$85.50

c.
\$90.00

EBIT \$150.00

d.
\$94.50

Tax Rate 40%

e.
\$99.23

NOPAT=\$90.0

2. Tibbs Inc. had the following data for the year ending 12/31/07: Net income = \$300; Net operating profit after taxes (NOPAT) = \$400; Total
The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to \$33,000. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE?

a.
9.32%

b.
9.82%

c.
10.33%

d.
10.88%

e.
11.42%

9.
Stewart Inc.'s latest EPS was \$3.50, its book value per share was \$22.75, it had 215,000 shares outstanding, and its debt ratio was 46%. How much debt was outstanding?

a.
\$3,393,738

b.
\$3,572,356

c.
\$3,760,375

d.
\$3,958,289

e.
\$4,166,620

10.
Last year Vaughn Corp. had sales of \$315,000 and a net income of \$17,832, and its year-end assets were \$210,000. The firm's total-debt-to-total-assets ratio was 42.5%. Based on the Du Pont equation, what was Vaughn's ROE?

a.
14.77%

b.
15.51%

c.
16.28%

d.
17.10%

e.
17.95%

11.
Last year Central Chemicals had sales of \$205,000, assets of \$127,500, a profit margin of 5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by \$21,000 without affecting either sales or costs. Had it reduced its assets in this amount, and had the debt ratio, sales, and costs remained