Business Finance: 5 Questions! Need answers ASAP! A lot of points! 1.) Which of

Question

Business Finance: 5 Questions! Need answers ASAP! A lot of points!

1.) Which of the following actions are Sources or Uses of funds?

A. An Increase of $2 million of new common stock.

B. In increase in new plant and equipment at a cost of $3 million.

C. Notes payable are decreased.

D. Increases dividend paid on its common stock.

2.) A company had $55,000 in cash at year-end 2013 and $25,000 in cash at year-end 2014. The firm invested in plant and equipment totaling $250,000. Cash flow from investing activities totaled +$170,000 and cash flow from financing activities totaled +$170,000. What was the cash flow from operating activites?

3.) Computer World paid out $22.5 million in total common dividends and reported $278.9 million of retained earnings at year-end. The prior years retained earnings were $212.3 million. What was Net Income?

4.) For 2014, an electronics firm reported $22.5 million of sales and $18 million of operating costs (including depreciation). The company has $15 million of invested capital and the after tax cost of capital is 9%. Tax rate is 35%. What was the Economic Value Added (EVA)?

5.) Byrd Lumber has 2 million shares of common stock outstanding that sells for $17 per share. If the company has $40 million of common equity on its balance sheet, what is the company's Market Value Added?

A. -$5,415,000

B. -$5,700,000

C. -$6,000,000

D. -$6,300,000

E. -$6,615,000

Explanation / Answer

Hi,

Please find the detailed answers as follows:

Part 1:

a) Source of Funds

b) Use of Funds

c) Use of Funds

d) Use of Funds

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Part 2:

Ending Cash Balance = Opening Cash Balance + Cash Flow from Operating Activities + Cash Flow from Investing Activities + Cash Flow from Financing Activities

25000 = 55000 +  Cash Flow from Operating Activities + 170000 + 170000

Cash Flow from Operating Activities = 25000 - 55000 - 170000 - 170000 = -370000

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Part 3:

Closing Retained Earnings = Opening Retained Earings + Net Income - Dividends

278.9 = 212.3 + Net Income - 22.5

Net Income = 278.9 - 212.3 + 22.5 = $89.1 million

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Part 4:

EVA = Net Operating Profit after Tax - Cost of Capital*Investment = (22.5 - 18)*(1-.35) - 15*9% = $1.575 million

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Part 5:

Market Value Added = Total Market Value - Book Value = 40000000 - 2000000*17 = -$6000000 (Option C)

Thanks.

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