Wentdt Corporation Had $ 10.5 Million Of Taxable Income Essay

Chapter 2 problem 2-8, p. 79

The Wendt Corporation had $10.5 million of taxable income.

a. What is the company’s federal income tax bill for the year?

Answer: $10.5 x 0.35 = $525, 000.00

b. Assume the firm receives an additional $1 million of interest from some bonds it owns. What is the tax on this interest income?

Answer: $1,000,000.00 x 0.35 = $350,000.00

c. Now assume that Wendt does not receive the interest income but does receive an additional $1 million as dividends on some stock it owns. What is the tax on this dividend income?

Answer: $1.000,000.00 x 0.105 = $105, 000.00

Chapter 3 problem, 3-6 p. 112 (Du Pont Analysis)

Donaldson & Sons has a ROA of 10%, a 2% profit margin, and a return on equity
Answer: ROE = PM x TATO x TA/E [Equity Multiplier] DU Pont= 15% = 2% x 5 x EM 15%/10% = EM =
= $90,000 x .80) $72,000 Cash = ($72,000 - $45,000) $27,000

Debt Ratio = 5.0, inventory balance = (337,500/5) $67,500 Fixed Assets = ($300,000 - $27,000, - $45,000, - $67,500)