86. The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.'s current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the Widget Co.'s assets today is _____ and the market value of those assets is _____. Book value = ($725,000 + $1,375,000) + $2,500,000 = $4,600,000 Market value = $1,900,000 + $2,000,000 = $3,900,000 Analytic Blooms: Apply Difficulty: 1 Easy EOC: 2-5 Learning Objective: 02-01 The difference between accounting value (or "book" value) and market value. Section: 2.1 Topic: Market and book value 87. Enterprises had $200,000 in 2011 taxable income. What is the firm's average tax rate based on the rates shown in the following table? Tax = .15($50,000) + .25($25,000) + .34($25,000) + .39($200,000 - $100,000) = $61,250 Average tax rate = $61,250/$200,000 = 30.63 percent Analytic Blooms: Apply Difficulty: 1 Easy EOC: 2-7 Learning Objective: 02-03 The difference between average and marginal tax rates. Section: 2.3 Topic: Average tax rate
86. The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.'s current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the Widget Co.'s assets today is _____ and the market value of those assets is _____. Book value = ($725,000 + $1,375,000) + $2,500,000 = $4,600,000 Market value = $1,900,000 + $2,000,000 = $3,900,000 Analytic Blooms: Apply Difficulty: 1 Easy EOC: 2-5 Learning Objective: 02-01 The difference between accounting value (or "book" value) and market value. Section: 2.1 Topic: Market and book value 87. Enterprises had $200,000 in 2011 taxable income. What is the firm's average tax rate based on the rates shown in the following table? Tax = .15($50,000) + .25($25,000) + .34($25,000) + .39($200,000 - $100,000) = $61,250 Average tax rate = $61,250/$200,000 = 30.63 percent Analytic Blooms: Apply Difficulty: 1 Easy EOC: 2-7 Learning Objective: 02-03 The difference between average and marginal tax rates. Section: 2.3 Topic: Average tax rate
Test-Bank-for-Fundamentals-of-Corporate-Finance-10th-Edition-Ross-Westerfield.docx