Fin 33 Version 1 FINAL EXAM PLEASE DO NOT REMOVE THE FRONT PAGE OF YOUR TEST! Mu

Question

Fin 33 Version 1 FINAL EXAM PLEASE DO NOT REMOVE THE FRONT PAGE OF YOUR TEST! Multiple choice: 14 problems @ 4 points each (Total 56 points). Please circle the lether nest to dhe most correct answer. There is no partial credit for multiple choice questions. Good ec I. In 2017 Schrute Farms, Inc. recently reported $4,530 in depreciation. It had $15,000 of bonds outstanding that carry a l 1.50% interest rate, and its tax rate was 35%. If Schrute Farms reported a net income of 3,450. How mach did the firm record in sales for 2017 if operating costs were 75% of sales? A. $66,410.00 B. $65,820.00 C. $62,564.18 D. $68,820.89 E. $66,998.45 BiffCo. Has 6 million in assets, and its tax rate is 35% Its basic earning power is (BEP) is 14%. and its return on assets (ROA) is 8.5%. What is BiffCo's times-interest-eared 0TIE) ratio? 2. A. 6.22x B. 6.05x C. 8.27x D. 7.85x E. 8.85x Sheldon Science Corp. has a profit margin of 4.5% and an equity multiplier of 1.5. Its sales are $225 million, and it has total assets of $75 million. What is its ROE? 3, A. 20.25% B. 18.45% C. 21.35% D. 20.95% E. 22.15%

Explanation / Answer

Answer 3

Equity multiplier = total assets/ total equity = 1.5

if total assets = 75 million

then total equity = 75/1.5 = 50$ million

Earnings = sales * profit percentage = 225*4.5% = 10.125

Then ROE = Return/equity = 10.125 / 50 *100 = 20.25%

means answer (a) is correct

Answer 2

BEP = EBIT / total assets = 14%

if total assets = 6m

then EBIT = 6m * 14% = 0.84

ROA = EAT / Total Assets = 8.5%

EAT = 6m * 8.5% = 0.51

Therefore EBT = 0.51/65% = 0.784

EBIT = 0.84

Interest = EBIT - EBT = 0.84 - 0.784 = 0.055

TIE ratio is equal to EBIT / interest = 0.84/0.055 = 15.167 times

All the options in this question is incorrect

Answer 1

Net income = 3450

Therefore EBT = 3450/65% = 5307.69

Interest = 15000*11.5% = 1725

EBIT = EBT + Interest = 5307.69 + 1725 = 7032.69$

Operating expenses is 75% of sales

therefore operating income is 25% of sales = 7032.69$

Then sales = 7032.69/25% = 28130.77 $

Assumption :- Depreciation is a operating Expense

Means all the answer in this question is incorrect the right answer is 28130.77$

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