problem 1: Madison Metals freshly reported $9,000 of sales, $6,000 of operating costs other than depreciation and $1,500 of depreciation. The company had no amortization charges and no non-operating income. It had issued $4,000 of bonds which carry a 7% interest rate and its federal-plus-state income tax rate was 40%. Determine the firm's taxable or pre-tax, income?
problem 2: Fine Breads Inc. paid out $26,000 common dividends throughout 2005 and it ended the year with $150,000 of retained earnings. The prior year's retained earnings were $145,500. Determine the firm's 2005 total income?
problem 3: Cox Corporation reported EBITDA of $22.5 million and $5.4 million of total income. The company has a $6 million interest expense and its corporate tax rate is 35%. Determine Cox's depreciation and amortization expenditure?
a) $ 4,333,650
b) $ 8,192,308
c) $ 9,427,973
problem 4: Garfield Inc. is expanding all through the Southeast United States and it expects sales to rise by $1 million and operating costs (apart from depr and amort) by $700,000. Depreciation and amortization expenses will increase by $50,000 and interest expense by $150,000, whereas the company's tax rate will remain at 40%. If the company's forecast is right, how much will total income change, as a result of expansion?
a) No change
b) $ 40,000 increase
c) $ 60,000 increase
d) $100,000 increase
e) $180,000 increase
problem 5: Hebner Housing Corporation has forecast the given numbers for the upcoming year:
- Sales = $1,000,000.
- Cost of goods sold = 600,000.
- Interest expense = 100,000.
- Net income = 180,000.
The company is in 40% tax bracket and its cost of goods sold always represents 60% of its sales.
The company's CEO is not happy with the forecast and wants the firm to accomplish a total income equivalent to $240,000. Supposing interest expense is unchanged, what level of sales will the company have to accomplish?
a) $ 400,000
b) $ 500,000
c) $ 750,000