Reference no: EM13338715

1) ABC recently reported $42,198 of sales, $13,908of operating costs other than depreciation, and $5,423 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding that carry a 10% interest rate. How much was the firm's taxable income, or earnings before taxes (EBT)?

Hint: Interest rate = Bonds outstanding * interest rate

2) During 2007, ABC had sales of $67,381. Cost of goods sold, administrative expenses and selling expenses, and depreciation expenses were $27,193, $4,346, and $9,541, respectively. In addition, the company had an interest expense of $4,439, and a tax rate of 33%. The company paid$7,528 as dividends. If the retained earnings is 2006 were $51,649, what are the retained earnings in 2007?

3) An investor recently purchased a corporate bond that yields 9.3%. The investor is in the 31% combined federal and state tax bracket. What is the bond's after-tax yield?

4) ABC company had a taxable income of $187,859 from operations after all operating costs but before interest charges of $59,616, dividends received of $74,677, dividends paid of $5,000, and income taxes. What is the firm's income tax liability?

Hint: use the tax table to compute taxes.