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Date Posted: 14:01:09 02/23/00 Wed
Author: Ed hill
Subject: Re: Corrections to Another sample midterm answers Q14
In reply to: Charles Hodges 's message, "Corrections to Another sample midterm answers" on 17:18:30 02/22/00 Tue

> Again, I only leave the answers needing correction or
> explanations.
>
> > 6. False
> True, both are after tax, but Net Income is also after
> income expenses, thus net income is lower.
>
> > 8. C. Pay payables
> best answer is pays interest since this is an
> operating expense, paying payables may not be
> reflected in income statement and therefore may not
> impact taxes paid. I ended up also accepting E, since
> you could consider that "pays interest" and the income
> statement's interest expenses are not the same thing.
>
> > 9.
> lots of choices here, all related to accrual
> accounting, think sources of funds that would be
> listed on the statement of cash flows.
>
> > 12. Worse, worse, better, better
> Company is Better, worse, better, better than
> industry. Higher turnover is better.
>
>
> 14.
>
>
> > 15. 8 (1-28%) for corporate and 6% for muni
>
> 18. recheck this answer.
>
> > 20. 300,000
> should be 600,000 equal 3,200,000/1,600,000
>
> > 21. E. Statements a and c are correct
> Answer is A, inverted yield curves are possible making
> b and c false.
>
> > 22. C. 2%
> Better answer is 3%, t-bills are not considered to
> have a liquidity premium, I gave credit for 2 and 3
>
> > 23. A.
> Answer is D
>
> > 26. True
> Better answer is False, intercept is 0. postive y
> implies fixed costs which may adversely impact results
> from percent of sales method. I think I through out
> this question.

For question 14 I have owners equity at $9.38
NI/Sales=8%=2.50/sales=8%...sales=31.21
sales/assets=2.0=31.21/assets...assets=15.63
debt/assets=40%=debt/15.63...debt=6.252
assets=lia + OE ... 15.63=6.25+OE...OE=9.38

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