EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 2, Problem 15P
See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12 million at the end of 2013, and this equipment was
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
See Table 2.5 E showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12.1 million at the end of 2013, and this equipment
was depreciated by $4 million per year in 2014, 2015, and 2016. Given Mydeco's tax rate of 25%, what impact would this additional purchase have had on Mydeco's net income in years 2013-2016?
(Assume the equipment is paid for out of cash and that Mydeco earns no interest on its cash balances.)
Hhing is the
Calculate the new net income below: (Round to one decimal place.)
(millions) Year
2013
2014
2015
2016
question
Net Income
2$
$
2$
2$
Additional Depreciation
$
2$
$
$
Tax Savings
2$
2$
2$
2$
New Net Income
$4
2$
2$
tables
Data Table
2012-2016 Financial Statement Data and Stock Price Data for Mydeco Corp.
(All data as of fiscal year end; in $ millions)
Total Current Assets
165.8
170.2
183.6
190.5
215.9
Income Statement
2012
2013
2014
2015
2016
313.4
346.6
Net Property, Plant & Equipment
Goodwill…
The data table shows financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $11.7 million at the end of 2016, and this equipment was depreciated by $3.9 million per year in 2017, 2018, and 2019. Given Mydeco‘s tax rate of 35%, what impact would this additional purchase have had on Mydecco’s net income in years 2016-2019? Assume that the equipment is paid for out of cash and that Mydeco earns no interest on its cash balances.
In the table, calculate the new net income below.
**round to one decimal place**
An analyst has collected the following information regarding YYYYY:
Earnings before interest and taxes (EBIT) = P700 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) = P850 million.
Interest expense = P200 million.
The corporate tax rate is 40 percent.
Depreciation is the company’s only non-cash expense or revenue.
What is the company’s net cash flow?
Chapter 2 Solutions
EBK CORPORATE FINANCE
Ch. 2.1 - Prob. 1CCCh. 2.1 - Prob. 2CCCh. 2.2 - Prob. 1CCCh. 2.2 - Prob. 2CCCh. 2.2 - Prob. 3CCCh. 2.3 - What it is the difference between a firms gross...Ch. 2.3 - What is the diluted earnings per share?Ch. 2.4 - Prob. 1CCCh. 2.4 - Prob. 2CCCh. 2.5 - Prob. 1CC
Ch. 2.5 - Prob. 2CCCh. 2.6 - Why is EBITDA used to assess a firms ability to...Ch. 2.6 - Prob. 2CCCh. 2.6 - Prob. 3CCCh. 2.6 - Prob. 4CCCh. 2.7 - Describe the transactions Enron used to increase...Ch. 2.7 - Prob. 2CCCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Consider the following potential events that might...Ch. 2 - What was the change m Global Conglomerates book...Ch. 2 - Find online the annual 10-K report for Costco...Ch. 2 - In early 2012, General Electric (GE) had a book...Ch. 2 - In early-2015, Abercrombie Fitch (ANF) had a book...Ch. 2 - Prob. 10PCh. 2 - Suppose that in 2016, Global launches an...Ch. 2 - Find online the annual 10-K report for Costco...Ch. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - Suppose a firms tax rate is 35%. a. What effect...Ch. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - Prob. 22PCh. 2 - Can a firm with positive net income run out of...Ch. 2 - Suppose your firm receives a 5 million order on...Ch. 2 - Nokela Industries purchases a 40 million...Ch. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - Find online the annual 10-K report for Costco...Ch. 2 - Prob. 28PCh. 2 - For fiscal year end 2015, Wal-Mart Stores, Inc....Ch. 2 - Prob. 30PCh. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - See Table 2.5 showing financial statement data and...Ch. 2 - Use the data in Problem 8 to determine the change,...Ch. 2 - You are analyzing the leverage of two firms and...Ch. 2 - Prob. 37PCh. 2 - Prob. 38PCh. 2 - Prob. 39PCh. 2 - Prob. 40PCh. 2 - Prob. 41PCh. 2 - Prob. 42PCh. 2 - Consider a retailing firm with a net profit margin...Ch. 2 - Prob. 44PCh. 2 - Prob. 45P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Fusion Energy Co's earnings before interest and taxes (EBIT) was $275 million. Assuming Fusion Energy's tax rate is 25%, what is their net operating profit after taxes (NOPAT) for 2015 expressed in millions of dollars? Now: In 2015, Fusion Energy spent $30 million on capital expenditures, experienced a decrease in net working capital (including cash) equal to # 70 million, and realized $10 million in depreciation. What is Fusion Energy's unlevered free cash flow for 2015? 393.75 116.25 373.75 256.25arrow_forwardXYZ Corp. had the following data for 2012, in millions: Net income = $500; EBIT = $700; Depreciation & Amortization = $100; and Gross fixed assets = $2,000. Information for 2013 is as follows: Net income = $625; EBIT = $925; Depreciation & Amortization = $110; and Gross fixed assets = $2,280. Assume the tax rate is 40% and the company invested $160 in NOWC in 2013. How much free cash flow did the firm generate during 2013?arrow_forwardIn 2017, Eraser Corp had Revenue of $200 million, Cost of Goods Sold of $100 million (this includes Depreciation of $50 million), Sales General and Admin Expenses of $50 million, and faced a tax rate of 21%. Assume that no money was spent on Capital Expenditures or on additional Net Working Capital. According to our recipe, what should be the after-tax cash flow generated by Eraser Corp in 2017 (in millions)?arrow_forward
- For 2018, Gourmet Kitchen Products reported $22 million of sales and $19 million of operating costs (including depreciation). The company has $15 million of total invested capital. Its after-tax cost of capital is 8% and its federal-plus-state income tax rate was 36%. What was the firm's economic value added (EVA), that is, how much value did management add to stockholders' wealth during 2018? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary.arrow_forwardFor 2018, gourmet kitchen products reported $22 million of sales & $19 million of operating costs (including depreciation). The compnay had $15 million of total invested capital. Its after tax cost of capital is 8% h its federal-plus- state income tax rate was 34%. What was the firm's economic value added (EVA) thay is how much value did management add to stockholders wealth during 2018?arrow_forwardSuppose a firm has the following information: Sales = $10million; costs of goods sold (excluding depreciation) = $5 million;depreciation = $1.4 million; other operating expenses = $2 million;interest expense = $1 million. If the tax rate is 25%, what is NOPAT,the net operating profit after taxes? ($1.2 million)arrow_forward
- 13. Pfizer had EBIT of $311 million in 2010. Pfizer also had interest expenses of $115 million and a corporate tax rate of 40%. What is Pfizer’s 2010 net income? Show your work. What is the total of Pfizer’s 2010 net income plus interest payments? Show your work. If Pfizer had no interest expenses, what would have been its 2010 net income, and how does it compare to your answer in part (2)?arrow_forwardHartzell Inc. had the following data for 2020, in millions: Net income = $600; after-tax operating income [EBIT(1 - T)] = $700; and Total assets = $2,000. Information for 2021 is as follows: Net income = $825; after-tax operating income [EBIT(1 - T)] = $850; and Total assets = $2,500. Assume the firm had no excess cash. How much free cash flow did the firm generate during 2021?arrow_forwardHartzell Inc. had the following data for 2020, in millions: Net income = $600; after-tax operating income [EBIT(1-T)] = $700; and Total assets = $1,700. Information for 2021 is as follows: Net income = $825; after-tax operating income [EBIT(1-T)] = $1,700; and Total assets = $2,250. Assume the firm had no excess cash. How much free cash flow did the firm generate during 2021? O a. $275 million O b. $2,250 million O c. $1,375 million O d. $1,150 million O e. $1,475 millionarrow_forward
- 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?arrow_forwardTalbot Enterprises recently reported an EBITDA of $8 million and net income of $2.4 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?arrow_forwardSuppose Torche Corporation has the following revenue and expenses for 2022: Revenues of $9,100,000 Cost of Goods Sold of $2,730,000 Depreciation Expenses of $500,000 Income Taxes of $1,672,000 Interest Expenses of $180,000 Other Expenses of $600,000 Sales, General, & Administrative Expenses of $910,000 Create an income statement with amounts in thousands What is the value of Earnings Before Interest & Taxes?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Financial Projections for Startups Basic Walkthrough; Author: Mike Lingle;https://www.youtube.com/watch?v=7avegQF4dxI;License: Standard youtube license