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b. For a taxable income of $265,000, what is the marginal tax rate? c. For a taxable income of $265.000, what is the total tax bill? d. For a taxable income of $265,000, what is the average tax rate? ini Case CASH FLOWS AT WARF COMPUTERS, INC. Warf Computers, Inc., was founded 15 years ago by Nick Warf, a computer programmer. The small initial investment to start the company was made by Nick and his friends. Over the years, this same group has supplied the limited additional investment needed by the company in the form of both equity and short and long-term debt. Recently the company has developed a virtual keyboard (VK). The VK uses sophisticated artificial intelligence algorithms that allow the user to speak naturally and have the computer input the text, correct spelling and grammatical errors, and format the document according to preset user guidelines. The VK even suggests alternative phrasing and sentence structure, and it provides detailed stylistic diagnostics. Based on a proprietary, very advanced software/hardware hybrid technology, the system is a full generation beyond what is cur- rently on the market. To introduce the VK, the company will require significant outside investment. Nick has made the decision to seek this outside financing in the form of new equity investments and bank loans. Naturally, new investors and the banks will require a detailed financial analysis. Your employer, Angus Jones & Partners, LLC, has asked you to examine the financial statements provided by Nick. Here are the balance sheets for the two most recent years and the most recent income statement: UW 41 WARF COMPUTERS Balance Sheets ($ in thousands) 2018 2019 $469 $ 542 802 859 795769 110 $2.160 $2.280 94 Current assets Cash and equivalents Accounts receivable Inventories Other Total current assets Fixed assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Intangible assets and others Total fixed assets $ 3.815 $4.978 1310 1.608 2018 2019 Current abilities Accounts payable $ 582 $ 623 Accrued expenses 481 296 Total current liabilities $1063 $ 919 Long-term liabilities Deferred taxes $ 191 $ 257 Long-term debt 1379 1415 Total long-term liabilities $ 1.570 $ 1672 Stockholders' equity Preferred stock $ 25 $ 25 Common stock 151 155 Capital surplus 934 949 Accumulated retained 924 3112 earnings Less treasury stock 151 230 Total equity $2.883 $4.01 Total liabilities and shareholders' equity $5.516 56.602 $2.505 $3,370 851 $3.356 953 $4322 Total assets $5.516 $6.602 WARF COMPUTERS Income Statement ($ in thousands) $9,068 5,347 298 $2,575 $2,665 Sales Cost of goods sold Selling general, and administrative expense Depreciation Operating income Other income EBIT Interest expense Pretax income Taxes Current: $559 Deferred: $66 Net income Dividends Retained earnings 164 $ 2,501 625 $ 1,876 $ 689 $ 1,188 Nick also has provided the following information: During the year the company raised $274,000 in new long-term debt and retired $238,000 in long-term debt. The company also sold $19.000 in new stock and repurchased $79,000 in stock. The company purchased $1.778,000 in fixed assets and sold $514,000 in fixed assets. Angus has asked you to prepare the financial statement of cash flows and the accounting statement of cash flows. He also has asked you to answer the following questions: 1. How would you describe Warf Computers's cash flows? 2. Which cash flow statement more accurately describes the cash flows at the company? 3. In light of your previous answers, comment on Nick's expansion plans

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