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# Calculate equity, cash flow, total fixed assets, return on

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1. During the last year Bruce had Net Income of \$150, paid \$20 in dividends, and sold new stock for
\$40. Beginning equity for the year was \$700. Ending Equity was?

2. The Beverly's had an operating income (EBIT) of \$260,000 last year. The firm had \$18,000 in
depreciation expenses, \$15,000 in interest expenses, and \$60,000 in selling, general, and administrative
expenses. If the Beverly's has a marginal tax rate of 40 percent, what was its cash flow from operating
activities last year?

3. If Hill has a total asset turnover of 1.8, a fixed asset turnover of 3.2, a debt ratio of .5 and a total
debt of \$200,000, then fixed assets are:

4. What is the return on sales for Michaels Inc. if the current ratio = 2; total asset turnover = 1.5; total
assets = \$100,000; and EBIT = \$30,000? Assume the marginal tax rate for Michaels is 40% and that
interest expenses are \$10,000.

5. Assuming the following, calculate the return on equity for Mary, Inc.: Return on Sales= 5%;
Total asset turnover = 2; Debt ratio = .73

6. A perpetuity has a cash flow of \$30 and a discount rate of 10%. What is the value of the perpetuity?

7.Tricia has \$3,000 invested in Cingular with an expected return of 11.6 percent; \$10,000 in A&T with
an expected return of 12.8 percent; and \$6,000 in GM with an expected return of 12.2 percent. What is
Tricia's expected return on his portfolio?

#### Solution Preview

1. During the last year Bruce had Net Income of \$150, paid \$20 in dividends, and sold new stock for
\$40. Beginning equity for the year was \$700. Ending Equity was?

Beginning equity 700
New stock sold 40
Less Dividends 20
Ending Equity 870

2. The Beverly's had an operating income (EBIT) of \$260,000 last year. The firm had \$18,000 in
depreciation expenses, \$15,000 in interest expenses, and \$60,000 in selling, general, and administrative
expenses. If the Beverly's has a marginal tax rate of 40 percent, what was its cash flow from operating
activities last year?

Operating cash flow = EBIT(1 - Tax rate) + Depreciation
= 260,000(1 - 0.40) + 18,000
= 174,000

3. If Hill has a total asset turnover ...

#### Solution Summary

This solution is comprised of a detailed explanation to determine the ending equity, what was its cash flow from operating
activities last year, the fixed assets, the return on sales for Michaels Inc., the return on equity for Mary, Inc., the value of the perpetuity, and Tricia's expected return on his portfolio.

\$2.19