Question

Rose Brick’s balance sheet lists net fixed assets as $40 million. The fixed assets could currently...

Rose Brick’s balance sheet lists net fixed assets as $40 million. The fixed assets could currently be sold for $55 million. Rose Brick's current balance sheet shows current liabilities of $15 million and net working capital of $12 million. If all the current accounts were liquidated today, the company would receive $77 million cash after paying $15 million in liabilities.

Use Exhibit 2. What is the book value of Rose Brick's assets today? A. $137 million

B. $67 million

C. $40 million

D. $27 million

E. $12 million

Use Exhibit 2. What is the market value of Rose Brick's assets today? A. $147 million

B. $137 million

C. $92 million

D. $77 million

E. $67 million

Maplenut Bakery, Inc. had gross profit of 892,600, EBIT of $458,100, interest expense of $83,680 and net income of $279,200 in 2013. If EBT is taxable income, what is the firm's average tax rate in 2013? A. 34.1%

B. 29.9%

C. 27.1%

D. 25.4%
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Answer #1

1.B.$67 million.

book value of net fixed assets 40 million
current assets ($15 million current liabilities+$12 million net working capital) $27 million
book value of rose bricks assets $67 milllion

2.A$147 million.

market value of fixed assets 55 million
market value of current assets ($77 million in cash +$15 million liabilities paid off) 92 million
market value of assets 147 million

3.D.25.4%.

EBIT 458,100
less:interest (83,680)
EBT 374,420
less:tax (EBT - net income) 95,220
tax rate = tax / net income *100 25.4%
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