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1

Finance

1.Pop Evil, Inc.'s, net income for the most recent year was $10,146. The tax rate was 24 percent. The firm paid $3,430 in total interest expense and deducted $2,195 in depreciation expense. What was the cash coverage ratio for the year?

2.You decided to save money for a travel to Barcelona in two years. You decided to open a savings account and make equal monthly deposits for the next two years. You think that you need to save $5,000. You checked a few banks to find out the best savings account and identified one, the APR of which is 3.6%. You will receive interests every month and you are going to keep those received interests in your savings account. How much do you have to deposit each month into this account to have exactly $5,000 in two years? (i.e., you are going to make 24 monthly deposits starting from the end of this month. You have to have $5,000 in your account right after you make your twenty-fourth deposit)

3.If the appropriate interest rate is 10%, then present value of $725 paid at the beginning of each of the next 20 years is closest to:

4.Here are simplified financial statements for Watervan Corporation:

INCOME STATEMENT
(Figures in $ millions)
Net sales $

901.00

Cost of goods sold  

761.00

Depreciation  

51.00

Earnings before interest and taxes (EBIT) $

89.00

Interest expense  

32.00

Income before tax $

57.00

Taxes  

11.97

Net income $

45.03

 
BALANCE SHEET
(Figures in $ millions)
  End of Year   Start of Year
Assets              
Current assets $

389

    $

352

 
Long-term assets  

298

     

242

 
Total assets $

687

    $

594

 
Liabilities and shareholders’ equity              
Current liabilities $

214

    $

177

 
Long-term debt  

128

     

141

 
Shareholders’ equity  

345

     

240

 
Total liabilities and shareholders’ equity $

687

    $

558

 
 

The company’s cost of capital is 8.5%.

a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)

d. Is the company creating value for its shareholders?

 

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