Assume that a farmer has $223,500 in Total Assets and $90,500 in Owner Equity, faces a 15% income tax rate, and a 20% consumption rate. Further, assume that the interest rate is 12.5%. What is the rate-of-return on assets if the growth rate is 10.5%?
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- Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?Assume that a farmer has $157,500 in total assets and 102,600 in total debt faces 20% income tax rate and 40% consumption rate. Further assume that the rate of return on assets is 19.5% what is the interest rate if the firm growth rate is 11.5%?
- Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s marginal tax rate is 39 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? (Enter your answer as a whole number.)Vapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000,and its tax rate is 40 percent. Vapor Lock’s beta is 1.5.a. What is Vapor Lock’s DFL?b. If Vapor Lock were able to grow its EBIT by 50%, what would be the percentageincrease in net income?c. If Vapor Lock were able to grow its EBIT by 50%, what would be the resultingnet income?Thompson Trucking has $9 billion in assets, and its tax rate25%. Its basic earning power (BEP) ratio is 20%, and its returnon assets (ROA) is 5.25%. Whatis its time interest earned (TIF)ratio? Round you answer to twodecimal places.
- The cost of capital is 15%, the before-tax cost of debt is 9%, and the mar-ginal income tax rate is 40%. The market value of debt is $50 million and the market value of equity is $50 million. What is the cost of equity?Suppose you sell a fixed asset for $312,000 when its book value is $102,000. If your company’s marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?Assume Lasher’s Kitchen has pretax earnings of $150,000 after depreciation expense of $30,000. If the firm’s tax rate is 25 percent, what is its cash flow from operations? Round your answer to the nearest dollar. $
- Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2?An investor owns a property that produces an NOI of $110,000 and has an annual debt service of $70,000 and the forecast of cost recovery and interest deductions are $38,427 and $58,593 respectively. The investor’s marginal tax rate is 35 percent. The investor’s projected cash flow after taxes is: A. $30,000 B. $35,457 C. $43,256 D. $25,821An A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million, interest costs of $2 million, and a 30 percent average tax rate. a) Compute its DOL, DFL, and DCL. b) What will be the expected level of EBIT and net income if next year's sales rise 10 percent? c) What will be the expected level of EBIT and net income if next year's sales fall 20 percent?