TEST BANK FOR Corporate Finance Core Principles and
Applications 7th Edition By Stephen Ross
Chapter 1-21 Answers are at the End of Each Chapter
Chapter 1
Student name:
1) A firm has common stock of $86, paid-in surplus of $230, total liabilities of $390, current
assets of $350, and net fixed assets of $560. What is the amount of the shareholders' equity?
A) $910
B) $510
C) $520
D) $170
E) $706
2) Recently, the owner of Martha's Wares encountered severe legal problems and is trying to
sell her business. The company built a building at a cost of $1,190,000 that is currently
appraised at $1,390,000. The equipment originally cost $670,000 and is currently valued at
$417,000. The inventory is valued on the balance sheet at $360,000 but has a market value of
only one-half of that amount. The owner expects to collect 97 percent of the $200,200 in
accounts receivable. The firm has $11,200 in cash and owes a total of $1,390,000. The legal
problems are personal and unrelated to the actual business. What is the market value of this
firm?
A) $1,182,594
B) $802,394
C) $597,000
D) $1,542,594
E) $982,394
3) Ivan's, Incorporated, paid $500 in dividends and $595 in interest this past year. Common
stock increased by $205 and retained earnings decreased by $131. What is the net income for
the year?
A) $369
B) $800
C) $595
D) $964
E) $500
,4) The tax rates for a particular year are shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
What is the average tax rate for a firm with taxable income of $124,013?
A) 39.00%
B) 36.39%
C) 20.00%
D) 27.98%
E) 25.49%
5) The tax rates are as shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
Your firm currently has taxable income of $81,700. How much additional tax will you owe if
you increase your taxable income by $22,900?
A) $7,626
B) $8,016
C) $8,931
D) $7,636
E) $7,786
6) Your firm has net income of $371 on total sales of $1,460. Costs are $800 and depreciation is
$130. The tax rate is 30 percent. The firm does not have interest expenses. What is the
operating cash flow?
A) $501
B) $660
C) $901
D) $530
E) $371
,7) Teddy's Pillows had beginning net fixed assets of $477 and ending net fixed assets of $562.
Assets valued at $325 were sold during the year. Depreciation was $54. What is the amount
of net capital spending?
A) $464
B) $139
C) $85
D) $31
E) $291
8) At the beginning of the year, a firm has current assets of $332 and current liabilities of $236.
At the end of the year, the current assets are $501 and the current liabilities are $276. What is
the change in net working capital?
A) $209
B) $0
C) −$129
D) $129
E) $169
9) At the beginning of the year, long-term debt of a firm is $278 and total debt is $324. At the
end of the year, long-term debt is $254 and total debt is $334. The interest paid is $20. What
is the amount of the cash flow to creditors?
A) −$44
B) $24
C) $44
D) −$24
E) $20
10) Peggy Grey's Cookies has net income of $400. The firm pays out 30 percent of the net
income to its shareholders as dividends. During the year, the company sold $85 worth of
common stock. What is the cash flow to stockholders?
A) $205.00
B) $35.00
C) $280.00
D) $94.50
E) $120.00
, 11) A company has total equity of $1,905, net working capital of $155, long-term debt of $900,
and current liabilities of $930. What is the company's net fixed assets?
A) $1,085
B) $2,805
C) $2,650
D) $1,935
E) $3,735
12) Disturbed, Incorporated, had the following operating results for the past year: sales =
$22,569; depreciation = $1,370; interest expense = $1,104; costs = $16,520. The tax rate for
the year was 30 percent. What was the company's operating cash flow?
A) $7,122
B) $3,575
C) $4,977
D) $2,774
E) $2,503
13) A company has net working capital of $2,077. If all its current assets were liquidated, the
company would receive $6,001. What are the company's current liabilities?
A) $4,963
B) $8,078
C) $7,733
D) $3,924
E) $4,039
14) You are examining a company's balance sheet and find that it has total assets of $21,229, a
cash balance of $2,451, inventory of $5,201, current liabilities of $6,405 and accounts
receivable of $2,961. What is the company's net working capital?
A) $4,208
B) $1,757
C) $6,194
D) $14,824
E) $993
Applications 7th Edition By Stephen Ross
Chapter 1-21 Answers are at the End of Each Chapter
Chapter 1
Student name:
1) A firm has common stock of $86, paid-in surplus of $230, total liabilities of $390, current
assets of $350, and net fixed assets of $560. What is the amount of the shareholders' equity?
A) $910
B) $510
C) $520
D) $170
E) $706
2) Recently, the owner of Martha's Wares encountered severe legal problems and is trying to
sell her business. The company built a building at a cost of $1,190,000 that is currently
appraised at $1,390,000. The equipment originally cost $670,000 and is currently valued at
$417,000. The inventory is valued on the balance sheet at $360,000 but has a market value of
only one-half of that amount. The owner expects to collect 97 percent of the $200,200 in
accounts receivable. The firm has $11,200 in cash and owes a total of $1,390,000. The legal
problems are personal and unrelated to the actual business. What is the market value of this
firm?
A) $1,182,594
B) $802,394
C) $597,000
D) $1,542,594
E) $982,394
3) Ivan's, Incorporated, paid $500 in dividends and $595 in interest this past year. Common
stock increased by $205 and retained earnings decreased by $131. What is the net income for
the year?
A) $369
B) $800
C) $595
D) $964
E) $500
,4) The tax rates for a particular year are shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
What is the average tax rate for a firm with taxable income of $124,013?
A) 39.00%
B) 36.39%
C) 20.00%
D) 27.98%
E) 25.49%
5) The tax rates are as shown below:
Taxable Income Tax Rate
$0 – 50,000 15%
50,001 – 75,000 25%
75,001 – 100,000 34%
100,001 – 335,000 39%
Your firm currently has taxable income of $81,700. How much additional tax will you owe if
you increase your taxable income by $22,900?
A) $7,626
B) $8,016
C) $8,931
D) $7,636
E) $7,786
6) Your firm has net income of $371 on total sales of $1,460. Costs are $800 and depreciation is
$130. The tax rate is 30 percent. The firm does not have interest expenses. What is the
operating cash flow?
A) $501
B) $660
C) $901
D) $530
E) $371
,7) Teddy's Pillows had beginning net fixed assets of $477 and ending net fixed assets of $562.
Assets valued at $325 were sold during the year. Depreciation was $54. What is the amount
of net capital spending?
A) $464
B) $139
C) $85
D) $31
E) $291
8) At the beginning of the year, a firm has current assets of $332 and current liabilities of $236.
At the end of the year, the current assets are $501 and the current liabilities are $276. What is
the change in net working capital?
A) $209
B) $0
C) −$129
D) $129
E) $169
9) At the beginning of the year, long-term debt of a firm is $278 and total debt is $324. At the
end of the year, long-term debt is $254 and total debt is $334. The interest paid is $20. What
is the amount of the cash flow to creditors?
A) −$44
B) $24
C) $44
D) −$24
E) $20
10) Peggy Grey's Cookies has net income of $400. The firm pays out 30 percent of the net
income to its shareholders as dividends. During the year, the company sold $85 worth of
common stock. What is the cash flow to stockholders?
A) $205.00
B) $35.00
C) $280.00
D) $94.50
E) $120.00
, 11) A company has total equity of $1,905, net working capital of $155, long-term debt of $900,
and current liabilities of $930. What is the company's net fixed assets?
A) $1,085
B) $2,805
C) $2,650
D) $1,935
E) $3,735
12) Disturbed, Incorporated, had the following operating results for the past year: sales =
$22,569; depreciation = $1,370; interest expense = $1,104; costs = $16,520. The tax rate for
the year was 30 percent. What was the company's operating cash flow?
A) $7,122
B) $3,575
C) $4,977
D) $2,774
E) $2,503
13) A company has net working capital of $2,077. If all its current assets were liquidated, the
company would receive $6,001. What are the company's current liabilities?
A) $4,963
B) $8,078
C) $7,733
D) $3,924
E) $4,039
14) You are examining a company's balance sheet and find that it has total assets of $21,229, a
cash balance of $2,451, inventory of $5,201, current liabilities of $6,405 and accounts
receivable of $2,961. What is the company's net working capital?
A) $4,208
B) $1,757
C) $6,194
D) $14,824
E) $993
