CHAPTER 1 The Role of Financial Management

Q 1. Explain what is the appropriate goal of the firm and why alternative goals are inappropriate. Q 2. Explain how the typical corporate firm is organized as it relates to the financial management
function.

CHAPTER 1 The Business, Tax, and Financial Environments

Q 1. Last year Sweet Stuff Candy Corporation earned $172,000 before interest and
taxes. The firm paid $22,000 in interest charges and $48,000 in dividends. a. What is its taxable income? b. What is its tax liability?

Q 2. In 2001 Quick Quilters Corporation earned $350,000 before taxes from operations.
They received an additional $8,000 in cash dividends from a minor stock investment in National Needles a. b. c. d. What's the effective tax rate on this additional dividend income What amount of tax do they owe on the dividend income? Calculate the after-tax dividend income from their investment. Suppose that Kasper owned 50% of National Needles. What would the after-tax dividend income be now?

Q 3. Travelsite.com Travel Services was incorporated in 1998. It had taxable income as

follows: 1998 1999 2000 2001 2002 -$200,000 $100,000 $150,000 $300,000 -$150,000 What was Travelsite's tax payment or tax refund for each of the years? (Assume that the graduated tax rates discussed in your text apply to years 1998-2002.)