During 2009, Nick\'s Umbrella Corp. had sales of $741,000. Cost of goods sold, a

Question

During 2009, Nick's Umbrella Corp. had sales of $741,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $578,000, $101,000, and $127,000, respectively. In addition, the company had an interest expense of $96,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) Assume Nick's Umbrella Corp. paid out $16,000 in cash dividends. If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what is the firm's net new long-term debt?

Multiple Choice

$78,000

$0

$62,450

$18,500

$50,000

During 2009, Nick's Umbrella Corp. had sales of $741,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $578,000, $101,000, and $127,000, respectively. In addition, the company had an interest expense of $96,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) Assume Nick's Umbrella Corp. paid out $16,000 in cash dividends. If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what is the firm's net new long-term debt?

Explanation / Answer

sales 741,000 Cost of goods sold $578,000 Administrative and selling expenses, $101,000 Depreciation expenses $127,000 Interest expense $96,000 Tax rate 35%        (161,000) dividends $16,000 Cash expenses required will be new debt for the firm Cash inflow Saels 741,000 cash outflow Cost of goods sold $578,000 Administrative and selling expenses, $101,000 Interest expense $96,000 Dividend $16,000 $791,000 Hence, Cash needed = 791000-741000 $50,000 Correct answer is option $50000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.