Finance.

Please see attached.

A firm has $10 million of EBIT, depreciation and amortization charges of $2 million, and a tax rate of 40%. To maintain its current operations, it must invest $4 million in fixed assets and increase its operating working capital by $3 million. What is its free cash flow?

MACROBUTTON HTMLDirect
a. $500,000

MACROBUTTON HTMLDirect b. $1,000,000

MACROBUTTON HTMLDirect c. $2,000,000 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper

MACROBUTTON HTMLDirect d. $2,500,000

MACROBUTTON HTMLDirect e. $3,000,000

MACROBUTTON HTMLDirect
 b. False

All publicly-owned firms must use the same SEC-approved depreciation methods; hence, companies only prepare a GAAP set of financial statements to use for reporting to investors. True or false?

MACROBUTTON HTMLDirect  a. True

Stockholders’ equity consists of paid-in capital, which is the amount of money the firm has raised by issuing newly created shares to stockholders, and retained earnings, which is the sum of all past earnings minus all past dividends. True or false?

MACROBUTTON HTMLDirect
 a. True

						MACROBUTTON HTMLDirect  b. False

Which of the following does NOT increase cash and cash equivalents during the year?

MACROBUTTON HTMLDirect a. An increase in accounts payable

MACROBUTTON HTMLDirect b. A decrease in accounts receivable

MACROBUTTON HTMLDirect c. Repayment of long-term bonds

MACROBUTTON HTMLDirect d. An increase in notes payable

MACROBUTTON HTMLDirect e. A decrease in inventories

EBITDA stands for earnings before Interest, taxes, depreciation, and amortization. True or false?

MACROBUTTON HTMLDirect
 a. True

MACROBUTTON HTMLDirect
 b. False

Free cash flow (FCF) is the cash flow from operations, after investments necessary to maintain future cash flows, that is available for payment to investors, and it is found using the following equation. True or false? FCF = EBIT(1 − T) + Deprn and Amort − Req’d Capital expenditures & increase in NOWC MACROBUTTON HTMLDirect  a. True MACROBUTTON HTMLDirect  b. False

Depreciation is the decline in the value of fixed assets during a given period. Amortization is similar to depreciation, but it reflects the decline in the value of intangible assets such as goodwill, patents, and copyrights. True or false? MACROBUTTON HTMLDirect  a. True MACROBUTTON HTMLDirect  b. False

In any given year, even a very profitable company with growing sales might see a reduction in its cash and equivalents as shown in the statement of cash flows. The most likely reason for this to happen is that the firm decides to reduce its inventories, receivables, and fixed assets.

MACROBUTTON HTMLDirect
 a. True

MACROBUTTON HTMLDirect
 b. False

If a firm began the year showing $10 million as retained earnings on its balance sheet, had $2 million of net income for the year, and paid $3 million in dividends, what would be the amount of its retained earnings at the end of the year?

MACROBUTTON HTMLDirect a. $6,000,000

MACROBUTTON HTMLDirect b. $7,000,000

MACROBUTTON HTMLDirect c. $8,000,000

MACROBUTTON HTMLDirect d. $9,000,000

MACROBUTTON HTMLDirect e. $10,000,000

Last year Frm X had sales of $100,000, labor costs of $30,000, material costs of $30,000, and depreciation of $10,000. Assume that labor and material costs were paid in cash. The tax rate on its net income was 40%. What was the firm’s net income?

MACROBUTTON HTMLDirect a. $12,000

MACROBUTTON HTMLDirect b. $14,000

MACROBUTTON HTMLDirect c. $16,000

MACROBUTTON HTMLDirect d. $18,000

MACROBUTTON HTMLDirect e. $20,000

Since firms’ verbal statements might be false and misleading, the SEC permits firms to include in their annual report only numerical data that analysts can use to help forecast the firm’s future earnings. True or false?

MACROBUTTON HTMLDirect
 a. True

MACROBUTTON HTMLDirect
 b. False

Some firms are classified as S Corporations and some as C corporations. From a tax standpoint, C Corporation status is generally better.

MACROBUTTON HTMLDirect
 a. True

MACROBUTTON HTMLDirect
 b. False

If all sales and all costs were for cash, then a firm’s annual net income would equal its cash flow. However, depreciation is reported as a cost, but since it is not a cash cost, it must be added back to net income to find cash flow. True or false? MACROBUTTON HTMLDirect  a. True MACROBUTTON HTMLDirect  b. False

A firm’s balance sheet is designed to show what has happened to it over some past period, say from January 1, 2012 to December 31, 2012. True or false?

MACROBUTTON HTMLDirect
 a. True

MACROBUTTON HTMLDirect
 b. False

If a corporation had positive income and thus paid taxes in 2011 and 2010, but it incurred a loss in 2012, it could carry that loss back to those 2 prior years, reduce the taxable income in those years, and get a credit (in the form of a check) for any overpayments of past taxes. Moreover, if its 2012 loss was greater than the taxable income in those past 2 years, then it could carry the loss forward to reduce income in 2013 and beyond—up to 20 years. True or false?

MACROBUTTON HTMLDirect
 a. True

MACROBUTTON HTMLDirect
 b. False

Last year Firm X had sales of $100,000, labor costs of $30,000, material costs of $30,000, and depreciation of $10,000. Assume that labor and material costs were paid in cash. The tax rate on its net income was 40%. Assume that the firm made no capital expenditures and had no changes in net operating working capital during the year. What was Firm X’s free cash flow?

MACROBUTTON HTMLDirect a. $20,000

MACROBUTTON HTMLDirect b. $22,000

MACROBUTTON HTMLDirect c. $24,000

MACROBUTTON HTMLDirect d. $26,000

MACROBUTTON HTMLDirect e. $28,000