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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 YELLOWCODED CELLS DO NOT TOUCH THE NONYELLOWCODED CELLS
ANSWERS ARE IN THE REDBORDERED 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 Assignments^{1}

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 
^{1}The 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.
Balance Sheet 
2012 
2013 
2014 
Cash 
$9,000 
$7,282 
$14,000 
Shortterm 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 
Longterm 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% 
Liabilitiestoassets 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, liabilitiestoassets ratio, timesinterestearned, 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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