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Business Finance Chapter 2 Exam Questions With Answers 100% Verified.
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Draiman, Inc., has sales of $588,000, costs of $270,000, depreciation expense of $69,500, interest expense of $36,500, and a tax rate of 40 percent. (Enter your answer as directed, but do not round intermediate calculations.) Required: What is the net income for this firm? - correct answer ...

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  • November 6, 2024
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  • 2024/2025
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Business Finance Chapter 2

Draiman, Inc., has sales of $588,000, costs of $270,000, depreciation expense of $69,500, interest
expense of $36,500, and a tax rate of 40 percent. (Enter your answer as directed, but do not round
intermediate calculations.)




Required:

What is the net income for this firm? - correct answer Sales $588,000

Less COGS $270,000

Less Depreciation $69,500

EBIT$248,500

LESS Intrest $36,500

Tabable Income $212,000

LESS Taxes (40%) $84,800

Net Income $127,200



Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $4.1 million. The
machinery can be sold to the Romulans today for $6.3 million. Klingon's current balance sheet shows net
fixed assets of $2.9 million, current liabilities of $720,000, and net working capital of $131,000. If all the
current assets were liquidated today, the company would receive $835,000 cash.




Requirement 1:

What is the book value of Klingon's assets today? (Do not include the dollar sign ($).Enter your answer in
dollars, not millions of dollars, i.e. 1,234,567.)



Requirement 2:

, What is the market value? (Do not include the dollar sign ($). Enter your answer in dollars, not millions
of dollars, i.e. 1,234,567.) - correct answer Book Value of Assets= Current Assets +
Fixed Assets



Current Assets= Net Working Capital + Current Liabilities

131,000+720,000 = 851,000



Book Value= 851,000 + 2,900,000

=3,751,000



Market Value of Assets = 6,300,000 + 835,000

=7,135,000



Hammett, Inc., has sales of $19,720, costs of $9,310, depreciation expense of $1,980, and interest
expense of $1,470. Assume the tax rate is 40 percent. (Enter your answer as directed, but do not round
intermediate calculations.)




Required:

What is the operating cash flow? - correct answer Sales $19,720

LESS COGS $9,310

Less Depreciation $1,980

EBIT $8,430

LESS Intrest $1,470

Taxable Income $6,960

LESS Taxes(40%) $2784

Net Income $4,176




OCF = EBIT + Depreciation - Taxes

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