Question 1
We learned in class that agency problems arise in corporations because of a separation of ownership and management. Does it mean that agency problems can never arise in sole proprietorships and partnerships? Explain.
Question 2
In 2016, ABC Limited purchased new equipment with a CCA rate of 20% for $4,000,000. The company also spent $5,000,000 to purchase a new building with a CCA rate of 4%. Calculate the total CCA for ABC Limited for each of years 2016, 2017, and 2018. Show your calculation.
Question 3
You are given the following information for a company:
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2016
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Sales
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$22,800
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|
Cost of goods sold
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$16,050
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|
Depreciation expense
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$4,050
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|
Interest paid
|
$1,830
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|
Dividends paid
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$1,300
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|
Tax rate
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34%
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|
New debt issuance
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$0
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|
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2015
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2016
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|
Current assets
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$4,800
|
$5,930
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|
Current assets
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$2,700
|
$3,150
|
|
Net fixed assets
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$13,650
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$16,800
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a. Calculate the net income for 2016. (Hint: Taxes = Earnings before taxes x Tax rate)
b. Calculate the operating cash flow for 2016.
c. Calculate the cash flow from assets for 2016.
d. Calculate the cash flow to creditors and the cash flow to shareholders for 2016.
Question 4
You are given the following information for a company:
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2016
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|
Sales
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$11,592
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|
Cost of goods sold
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$5,405
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|
Depreciation expense
|
$1,033
|
|
Interest paid
|
$294
|
|
Tax rate
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35%
|
|
|
2015
|
2016
|
|
Current assets
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$914
|
$990
|
|
Net fixed assets
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$3,767
|
$4,536
|
|
Current liabilities
|
$365
|
$410
|
|
Long-term debt
|
$1,991
|
$2,117
|
a. Calculate the change in net working capital for 2016.
b. Calculate the cash flow from assets for 2016. (Hint: Taxes = Earnings before taxes x Tax rate)
c. Calculate the cash flow to creditors for 2016.