Magee Auto Finance Assignment Help With Solution

FIN 3300 Principles of Financial Management

1) During 2013, Magee Auto Supply Outlets had gross sales of $900,000, cost of goods sold of $300,000, and general and selling expenses of $400,000. The firm also had outstanding $200,000 of 10% coupon bonds with 12 years to maturity and $400,000 of 12% bonds with 25 years to maturity. Non-operating income was $0, depreciation was $10,000 and Magee paid dividends of $80,000 to its shareholders at the end of the year.

a) Set out Magee’s income statement showing the taxable income, taxes, net income, and earnings retained in 2013. Use the corporate tax table on Page 83 (also in the formula sheet) in the text book to figure out the taxes paid by Magee.
b) Compute Magee’s free cash flow in 2013. You may assume that Magee did not have any incremental Capex or Net Operating Working Capital needs for 2013.
c) Magee’s balance sheet as of December 31, 2012 showed retained earnings of $240,000.
What will the retained earnings be on December 31, 2013?
d) Suppose Magee also had dividend income of $10,000 that it earned from the stock of Starks
Corp. that it owns, and interest income of $7,500 from some T-bonds that it owns. What will be the new taxable income, new taxes, new net income, and new earnings retained in 2013?

2) The Harris Corporation has a taxable income of $128,000.

a) What is the total tax liability of Harris Corp.? Figure taxes using the table on Page 83.
b) What is its average tax rate?
c) What is its marginal tax rate?

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3) NewPro Corp. has the following items on its balance sheet as of Dec. 2013 (millions of $):
Current liabilities $20
Long-term Debt 10
Common Stock
& retained earnings 20
Net Fixed Assets 25
Cash & Marketable Securities 10
Accounts Receivable 5
What is the total inventory on the balance sheet?

4) Ms. Jefferson, a single individual, has the following income situation for the year 2013:
Salary of $83,100; qualified dividend income of $12,000; interest income from Intel bonds of $5,000; capital gains of $22,000 from the sale of Exxon stock that she had purchased in 2008; capital gains of $10,000 from the sale of Google stock that she had bought in June of 2013 and sold in December of 2013. Ms. Jefferson gets one exemption of $3,900, and she will use standard deductions of $6,100
a) Compute Ms. Jefferson’s taxable income for 2013.
b) Compute her federal taxes for 2013. What are her marginal and average tax rates?

5) Question 3-3 on page 88 of the textbook.

6) Question 3-13 a & b on page 89 of the textbook.

7) The latest balance sheet and income statement for Coleco Corporation are below:

Assets
Cash and equivalents 57,600 7,282
Accounts receivable 351,200 632,160
Inventories 715,200 1,287,360
Total current assets 1,124,000 1,926,802
Net fixed assets 344,800 939,790
Total Assets 1,467,800 2,866,592

Liabilities and Equity
Accounts payable 145,600 524,160
Accruals 136,000 489,600
Notes Payable 200,000 636,808
Total current liabilities 481,600 1,650,568
Long-term bonds 323,432 723,432
Common Equity:
Common stock (100,000 shares) 460,000 460,000
Retained earnings 230,768 32,592
Total common equity 663,768 492,592
Total liabilities & equity 1,467,800 2,866,592

2012 2013
Sales 3,432,000 6,034,000
Operating costs 3,222,672 6,047,988
Depreciation and amortization 18,900 116,960
= EBIT 190,428 (130,948)
– Interest Expenses 43,828 136,012
= EBT 146,600 (266,960)
– Taxes (@40%) 58,640 (106,784)
= Net Income 87,960 (160,176)

a) Estimate Net Operating Working Capital for 2012 and 2013.
b) Estimate Capex for 2013.
c) Estimate Coleco’s 2013 Free Cash Flow.

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