2A4H THE FINANCIAL STATEMENTS OF LARK INC. FOR LAST YEAR ARE SHOWN BE...
109.
CSO: 2A4h
LOS: 2A4h
The financial statements of Lark Inc. for last year are shown below.
Income Statement ($000)
Revenue
$4,000
Cost of sales
2,900
Gross margin
1,100
General & administrative
500
Interest
100
Taxes
150
Net income
$ 350
Balance Sheet ($000)
Current assets
$ 800
Current liabilities
$ 500
Plant & equipment
3,200
Long-term debt
$1,000
Common equity
2,500
Totals
$4,000
Totals
$4,000
If Lark’s book values approximate market values and if the opportunity costs of debt and
equity are 10% and 15%, respectively, what was the economic profit for Lark last year?
a.
($125,000).
b.
($25,000).
c.
$0.
d.
$350,000.
Section B: Corporate Finance