Question

1. Mariota Industries has sales of $316,500 and costs of $156,950. The company paid $25,350 in interest and $12,850 in dividends. It also increased retained earnings by $64,478 during the year. If the company's depreciation was $16,025, what was its average tax rate?

34.5600%

28.93%

12.91%

26.35%

52.82%

2. Simon's Hot Chicken purchased its building seven years ago at a price of $141,580. The building could be sold for $181,100 today. The company spent $67,140 on other fixed assets that could be sold for $59,740. The company has accumulated depreciation of $82,300 on its fixed assets. Currently, the company has current liabilities of $37,920 and net working capital of $19,420. What is the ending book value of net fixed assets?

$208,720

$164,340

$170,800

$126,420

$158,540

Answer 1

Sales = $316500

Less: Cost = $156950

EBITDA (Earnings before Interest tax depreciation and Amortization) = Sales - Cost = $159550

Depreciation = $16025

EBIT(Earnings before Interest and tax) = EBITDA-Depreciation = $143525

Interest = $25350

PBT(Profit Before tax) = EBIT - Interest = $118175

Tax = t%

PAT (Profit after tax)= (1-t)*118175

This should be equal to Dividends + Increase in Retained Earnings

Dividends + Increase in Retained Earnings = $12850+$64478 = $77328

PAT = $77328

t = 1- (77328/118175) = 34.56%

answer is a