Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 7QP
Calculating OCF [LO4] Ridiculousness, Inc., has sales of $43,800, costs of $22,700,
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
7. Calculating Break-Even [LO3] In each of the
following cases, calculate the accounting break-even and the
cash break-even points. Ignore any tax effects in calculating
the cash break-even.
Unit
Price
Unit Variable
Cost
Fixed
Costs
Depreciation
$2,980
$2,135 $8,100,000
185,000
$3,100,000
183,000
46
41
3
2,770
1,050
[EXCEL] Net present value: Crescent Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses an 18 percent discount rate for projects like this, should management go ahead with the project? Please use excel
Year Cash Flow
0 −$3,300,000
1 875,123
2 966,222
3 1,145,000
4 1,250,399
5 1,504,445
Problem 12-3 (Algo) Cash flow [LO12-2]
Assume a firm has earnings before depreciation and taxes of $610,000 and no depreciation. It is in a 30 percent tax bracket.
a. Compute its cash flow.
Cash flow
b. Assume it has $610,000 in depreciation. Recompute its cash flow.
Cash flow
c. How large a cash flow benefit did the depreciation provide?
Benefit in cash flow
Chapter 2 Solutions
Fundamentals of Corporate Finance
Ch. 2.1 - Prob. 2.1ACQCh. 2.1 - What is liquidity? Why is it important?Ch. 2.1 - What do we mean by financial leverage?Ch. 2.1 - Explain the difference between accounting value...Ch. 2.2 - What is the income statement equation?Ch. 2.2 - Prob. 2.2BCQCh. 2.2 - Why is accounting income not the same as cash...Ch. 2.3 - What is the difference between a marginal and an...Ch. 2.3 - Do the wealthiest corporations receive a tax break...Ch. 2.4 - Prob. 2.4ACQ
Ch. 2.4 - Prob. 2.4BCQCh. 2.4 - Why is interest paid not a component of operating...Ch. 2 - What types of accounts are the most liquid?Ch. 2 - What is an example of a noncash expense?Ch. 2 - The marginal tax rate is the tax rate which...Ch. 2 - Prob. 2.4CTFCh. 2 - Prob. 1CRCTCh. 2 - Accounting and Cash flows [LO2] Why might the...Ch. 2 - Prob. 3CRCTCh. 2 - Operating Cash Flow [LO2] In comparing accounting...Ch. 2 - Prob. 5CRCTCh. 2 - Cash Flow from Assets [LO4] Suppose a companys...Ch. 2 - Prob. 7CRCTCh. 2 - Net Working Capital and Capital Spending [LO4]...Ch. 2 - Prob. 9CRCTCh. 2 - Prob. 10CRCTCh. 2 - Prob. 11CRCTCh. 2 - Earnings Management [LO2] Companies often try to...Ch. 2 - Building a Balance Sheet [LO1] KCCO, Inc., has...Ch. 2 - Building an Income Statement [LO1] Billys...Ch. 2 - Dividends and Retained Earnings [LO1] Suppose the...Ch. 2 - Prob. 4QPCh. 2 - Calculating Taxes [LO3] The Dyrdek Co. had 267,000...Ch. 2 - Prob. 6QPCh. 2 - Calculating OCF [LO4] Ridiculousness, Inc., has...Ch. 2 - Calculating Net Capital Spending [LO4] Bowyer...Ch. 2 - Calculating Additions to NWC [LO4] The 2014...Ch. 2 - Cash Flow to Creditors [LO4] The 2014 balance...Ch. 2 - Cash Flow to Stockholders [LO4] The 2014 balance...Ch. 2 - Prob. 12QPCh. 2 - Market Values and Book Values [LO1] Klingon...Ch. 2 - Prob. 14QPCh. 2 - Using Income Statements [LO1] Given the following...Ch. 2 - Preparing a Balance Sheet [LO1] Prepare a 2015...Ch. 2 - Prob. 17QPCh. 2 - Prob. 18QPCh. 2 - Net Income and OCF [LO2] During 2014, Raines...Ch. 2 - Prob. 20QPCh. 2 - Prob. 21QPCh. 2 - Calculating Cash Flows [LO4] Consider the...Ch. 2 - Net Fixed Assets and Depreciation [LO4] On the...Ch. 2 - Prob. 24QPCh. 2 - Use the following information for Taco Swell,...Ch. 2 - Use the following information for Taco Swell,...Ch. 2 - Prob. 1MCh. 2 - Prob. 2M
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
- 3. Calculating Projected Net Income [LO1]A proposed new investment has projected sales of $585,000. Variable costs are 44 percent of sales, and fixed costs are $187,000; depreciation is $51,000. Prepare a pro forma income statement assuming a tax rate of 21 percent. What is the projected net income?arrow_forwardQuestion 6 So Long, Inc, has sales of $334,000, costs of $145,400, depreciation expense of $63,200 and interest expense of $22,300. If the tax rate is 35%, (a) What is the operating cash flow or OCF? (b) Explain why interest paid is not a component of operating cash flow.arrow_forward[EXCEL]Cash Flow DOL: The degree of pretax cash flow operating leverage at Rackit Corporation is 2.7 when it sells 100,000 units of its new tennis racket and its EBITDA is $95,000. Ignoring the effects of taxes, what are the fixed costs for Rackit Corporation? Please use excelarrow_forward
- Calculating Cash Flows [LO2] Dahlia Industries had the following operatingresults for 2009: sales $22,800; cost of goods sold $16,050; depreciationexpense $4,050; interest expense $1,830; dividends paid $1,300. At thebeginning of the year, net fi xed assets were $13,650, current assets were $4,800,and current liabilities were $2,700. At the end of the year, net fi xed assets were$16,800, current assets were $5,930, and current liabilities were $3,150. The taxrate for 2009 was 34 percent.a. What is net income for 2009?b. What is the operating cash fl ow for 2009?c. What is the cash fl ow from assets for 2009? Is this possible? Explain.d. If no new debt was issued during the year, what is the cash fl ow to creditors?What is the cash fl ow to stockholders? Explain and interpret the positive andnegative signs of your answers in ( a ) through ( d ).arrow_forward[EXCEL] Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for production system projects, in which system should the firm invest? Please use excel. Year System 1 System 2 0 −$15,000 −$45,000 1 15,000 32,000 2 15,000 32,000 3 15,000 32,000arrow_forward[EXCEL]Cash Flow DOL: The degree of pretax cash flow operating leverage at Rackit Corporation is 2.7 when it sells 100,000 units of its new tennis racket and its EBITDA is $95,000. Ignoring the effects of taxes, what are the fixed costs for Rackit Corporation?arrow_forward
- Calculating Total Cash Flows [LO4] Jetson Spacecraft Corp. shows thefollowing information on its 2009 income statement: sales $196,000; costs$104,000; other expenses $6,800; depreciation expense $9,100; interestexpense $14,800; taxes $21,455; dividends $10,400. In addition, you’retold that the fi rm issued $5,700 in new equity during 2009 and redeemed $7,300 inoutstanding long-term debt.a. What is the 2009 operating cash fl ow?b. What is the 2009 cash fl ow to creditors?c. What is the 2009 cash fl ow to stockholders?d. If net fi xed assets increased by $27,000 during the year, what was the addition toNWC?arrow_forwardWhat is the cash break-even point? Ignore Taxes. Price = $127 per unit; variable cost = $57 per unit; fixed cost = $105,000 per year; depreciation = $5,000 per year. Answer in handwritten formula, NOT EXCEL pleasearrow_forwardLO 2 4. Calculating OCF Consider the following income statement: Sales $537,200 Costs 346,800 Depreciation 94,500 EBIT ? Taxes (21%) ? Net income Fill in the missing numbers and then caicrlate e F What is the depreci- ation tax shield? 5. Calculating Depreciation A piece of new p equipmentarrow_forward
- Net Present Value Method, Present Value Index, and Analysis First United Bank Inc. is evaluating three capital investment projects using the net present value method. Relevant data related to the projects are summarized as follows: Branch Computer ATM Office System Kiosk Expansion Upgrade Expansion Amount to be invested $863,421 $519,486 $311,214 Annual net cash flows: Year 1 358,000 243,000 165,000 Year 2 333,000 219,000 114,000 Year 3 304,000 194,000 83,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162arrow_forwardCalculating Total Cash Flows [ LO4] Nightwish Corp. shows the following information on its 2021 income statement: Sales = $336,000; Costs = $194,700; Other expenses = $9,800; Depreciation expense = $20,600; Interest expense = $14,200; Taxes = $21,275; Dividends = $21,450. In addition, you're told that the firm issued $7,100 in new equity during 2021 and redeemed $5,40o in outstanding long-term debt. a. What is the 2021 operating cash flow? b. What is the 2021 cash flow to creditors? c. What is the 2021 cash flow to stockholders? d. If net fixed assets increased by $53,200 during the year, what was the addition to NWC?arrow_forwardEA4. LO 11.2 Assume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method? Option A, Product A Option B, Product B $190,000 190,000 60,000 20,000 $150,000 180,000 60,000 70,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
What is WACC-Weighted average cost of capital; Author: Learn to invest;https://www.youtube.com/watch?v=0inqw9cCJnM;License: Standard YouTube License, CC-BY