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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 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.
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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