fin534

FIN 534 HOMEWORK SET #1

PLEASE READ ALL ATTACHMENTS BEFORE OFFERING HELP !!

JANUARY 2015 NEW TERM INSTRUCTIONS/REQUIREMENTS

 

I have attached the Excel template and the Rubic…

 HOMEWORK SET 1 TEMPLATE

 

Directions:  Answer the following questions on this document.  Explain how you reached the answer

or show your work if a mathematical calculation is needed, or both.  Submit your assignment using the

assignment link in the course shell.  This homework assignment is worth 100 points.

 

Use the following information for Questions 1 through 8:

Assume that you recently graduated and have just reported to work as an investment advisor at one

of the firms on Wall Street.  You have been presented and asked to review the following Income

Statement and Balance Sheets of one of the firm’s clients.  Your boss has developed the following set of

questions you must answer.

YOU MUST ENTER CORRECT INFORMATION IN THE YELLOW-CODED CELLS DO NOT TOUCH THE NON-YELLOW-CODED CELLS

ANSWERS ARE IN THE RED-BORDERED CELLS

 

Table 1 below provides an overview of how points are earned for homework set assignments.  Each set has a possible 100 points.

 

No credit is earned for Homework Assignments that are not submitted.  Similarly, no credit is earned for homework submissions that are copied from instructor, solution, or other similar manuals or documents.

 

All homework submissions that involve “problems” (which is almost all questions) must be submitted in working Excel format.  This means that the Excel spreadsheet must be programmed to arrive at the appropriate solutions.  Simply typing answers and solutions into Excel earns no credit.

 

 Format for Homework Questions & Problems – In preparing and submitting solutions to assigned problems (i.e., questions involving quantitative solutions), it is acceptable and students are encouraged to use the Excel models (e.g., Homework Set Templates) that are provided by the instructor.  Alternatively, students may develop their own Excel solutions in which case the worksheets must include the formulas, Excel functions, or algebraic calculations that are used to solve the problems. 

 

ALL ASSIGNED HOMEWORK PROBLEMS MUST BE SUBMITTED IN WORKING EXCEL FORMAT.  IF PROBLEMS ARE NOT SUBMITTED IN WORKING EXCEL FORMAT, NO CREDIT IS EARNED EVEN IF A CORRECT ANSWER IS SUBMITTED.   

 

ALSO, NO CREDIT IS EARNED FOR HOMEWORK ASSIGNMENT SOLUTIONS THAT ARE COPIED FROM THE TEXTBOOK MANUAL OR OTHER SIMILAR SOURCE; NO CREDIT IS EARNED FOR ANSWERS THAT ARE TYPED INTO EXCEL WITHOUT THE APPROPRIATE PROGRAMMING.

 

Solutions to assigned problems submitted in Word, PowerPoint, Adobe pdf, or formats other than Excel are not acceptable and earn no credit. To receive credit, the submissions must include the inputs and calculations that are required to develop a solution and the Excel spreadsheets for problems must perform the actual calculations that are necessary to derive a correct solution. 

 

 

Table 1: FIN534 – Evaluation of Homework Set Assignments1

 

 

Deduction for Not Submitting a Response for a Problem / Question

Deduction for Incorrect Answer for a Problem / Question

Total Points Earned for Correct Solution

For 9 Question Homework Sets

 

 

11.111

 

 

6.00

 

11.111

 

For 8 Question Homework Sets

 

 

12.50

 

 

7.00

 

 

12.50

1The instructor may make any other adjustments to the evaluations that are reasonable

 

   and appropriate.

 

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

 

Use the following information for Questions 1 through 8:

Assume that you recently graduated and have just reported to work as an investment advisor at the one of the firms on Wall Street. You have been presented and asked to review the following Income Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer.

 

Income Statements and Balance Sheet

 

 

Balance Sheet

2012

2013

2014

Cash

$9,000 

$7,282 

$14,000

Short-term investments

48,600

20,000

 71,632

Accounts receivable

351,200

632,160

 878,000

Inventories

715,200

1,287,360

 1,716,480

Total current assets

$1,124,000 

$1,946,802 

$2,680,112

Gross fixed assets

491,000

1,202,950

 1,220,000

Less: Accumulated depreciation

146,200

263,160

 383,160

Net fixed assets

$344,800 

$939,790 

$836,840

Total assets

$1,468,800 

$2,886,592 

$3,516,952

 

 

 

 

Liabilities and Equity

 

 

 

Accounts payable

$145,600 

$324,000 

$359,800

Notes payable

200,000

720,000

 300,000

Accruals

136,000

284,960

 380,000

Total current liabilities

$481,600 

$1,328,960 

$1,039,800

Long-term debt

323,432

1,000,000

 500,000

Common stock (100,000 shares)

460,000

460,000

1,680,936

Retained earnings

203,768

97,632

296,216

Total equity

$663,768 

$557,632 

$1,977,152

Total liabilities and equity

$1,468,800 

$2,886,592 

$3,516,952

Income Statements

2012

2013

2014

Sales

$3,432,000 

$5,834,400 

$7,035,600

Cost of goods sold except depr.

2,864,000

4,980,000

5,800,000

Depreciation and amortization

18,900

116,960

 120,000

Other expenses

340,000

720,000

 612,960

Total operating costs

$3,222,900 

$5,816,960 

$6,532,960

EBIT

$209,100 

$17,440 

$502,640

Interest expense

62,500

176,000

 80,000

EBT

$146,600 

($158,560)

$422,640

Taxes (40%)

58,640

-63,424

 169,056

Net income

$87,960 

($95,136)

$253,584

 

 

Other Data

2012

2013

2014

Stock price

$8.50 

$6.00 

$12.17

Shares outstanding

100,000

100,000

250,000

EPS

$0.88 

($0.95)

$1.104

DPS

$0.22 

0.11

0.22

Tax rate

40%

40%

40%

 

Book value per share

$6.64 

$5.58 

$7.909

Lease payments

$40,000 

$40,000 

$40,000

 

 

Ratio Analysis

2012

2013

Industry Average

Current

2.3

1.5

2.7 

Quick

0.8

0.5

1.0 

 

Inventory turnover

4

4

6.1 

Days sales outstanding

37.3

39.6

           32.0 

Fixed assets turnover

10

6.2

             7.0 

Total assets turnover

2.3

2

             2.5 

Debt ratio

35.60%

59.60%

32.0%

Liabilities-to-assets ratio

54.80%

80.70%

50.0%

TIE

3.3

0.1

6.2

EBITDA coverage

2.6

0.8

8.0

Profit margin

2.60%

−1.6%

3.6%

Basic earning power

14.20%

0.60%

17.8%

ROA

6.00%

−3.3%

9.0%

ROE

13.30%

−17.1%

17.9%

Price/Earnings (P/E)

9.7

−6.3

16.2

Price/Cash flow

8

27.5

7.6

Market/Book

1.3

1.1

2.9

 

 

 

1.     What is the free cash flow for 2014? 

 1.     Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?

 

 

2.     Calculate the 2014 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013?

 

3.     Calculate the 2014 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. 

 

4.     Calculate the 2014 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. What can you conclude from these ratios?

 

5.     Calculate the 2014 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?

 

6.     Calculate the 2014 price / earnings ratio, price / cash flow ratio, and market / book ratio.

 

7.     Use the extended DuPont equation to provide a summary and overview of company’s financial condition as projected for 2014. What are the firm’s major strengths and weaknesses? 

 

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