2024 – 1 8 marks Company A has the following incomplete balance sheet and income statement
COMM203 Introduction To Finance Assignment – 2024
1. (8 marks)
Company A has the following incomplete balance sheet and income statement, and the company’s tax rate is 35%.
Balance Sheet As of year End (Figures in millions of dollars)
|
Assets |
2011 |
|
2012 |
Liabilities |
2011 |
|
2012 |
|
Current Assets |
100 |
|
150 |
Current Liabilities |
80 |
|
80 |
|
Net Fixed Assets |
820 |
|
900 |
Long-Term Debt |
800 |
|
740 |
Income Statement, 2012 (Figures in millions of dollars)
Revenue 2280
Cost of Goods Sold 1060
Depreciation 360
Interest Expense 240
a. What does Company A earn before interest and taxes if Company A’s expenses only include cost of goods sold, depreciation and interest expenses?
b. What is Company A’s net income?
c. What is Company A’s investment in fixed assets in 2012?
d. What is the operating cash flow of Company A in 2012?
e. What is the addition to net working capital in 2012?
f. What is the cash flow from assets?
g. What is the cash flow to creditors?
h. What is the cash flow to shareholders?
2. (4 marks)
a. Fill in the table using the following information:
The Edwards School of Business has just bought new equipment at a total cost (including installation) of $160,000. The school expects them to last 4 years before they will need to be replaced and expects to sell them for $40,000 after the four years. The equipment is considered Class 10 or 30 percent for CCA purposes.
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Year |
Beginning UCC |
CCA |
Ending UCC |
|
1 |
|
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2 |
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3 |
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4 |
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b. If the school sells them for $40,000 after the four years, will there be a terminal loss, a CCA recapture, or neither? If so, how much will the amount of loss or recapture be?
3. (8 marks)
ABC Company
Financial Statements
Balance Sheet (in thousands)
2012
|
Assets Current assets |
|
|
Cash |
$ 300 |
|
Accounts Receivable |
325 |
|
Inventory |
450 |
Total $1,075
Fixed Assets
Net plant and equipment’s $6,350
Total Assets $7,425
|
Liabilities and Owners’ Equity Current liabilitites |
|
|
Accounts payable |
$ 400 |
|
Notes Payable |
1,750 |
Total $2,150
Long-term debt $2,350
|
Owners’ equity |
|
|
Common stock and paid-in surplus |
$1,250 |
|
Retained Earnings |
1,675 |
Total $2,925
Total liabilities and owners’ equity $7,425
|
Income Statement (in thousands) |
|
|
Sales |
$3,800 |
|
Cost of goods sold |
2,430 |
|
Depreciation |
340 |
Earnings before interest and taxes $1,030
Interest paid 530
Taxable income $ 500
Taxes (35%) 175
Net income $ 325
|
Dividends |
$ 75 |
|
Addition to retained earnings |
? |
a.)Based on the financial statements above, calculate the following list of financial ratios. (5 marks)
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1.Current ratio |
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2.Cash ratio |
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3.Days’ sales in inventory |
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4.Days’ sales in receivables |
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5.Total debt ratio |
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6.Times interest earned ratio |
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7.Return on Assets |
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8.Return on Equity |
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9.Fixed asset turnover |
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10.Profit Margin |
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b.)Construct the Du Pont identity for ABC Company.
c.)ABC Company has 200,000 shares of common stock outstanding and the market price for a share of stock at the end of 2012 was $26.
i. What are the additions to retained earnings?
ii. What is the price-earnings ratio?
iii. What are the dividends per share?
iv. What is the market-to-book ratio at the end of 2012?
4. (4 marks)
Based on the following information for Swine Corp., classify each even as a source or use of cash, by how much and the total change in cash?
Decrease in inventory $400
Decrease in accounts payable 160
Increase in notes payable 580
Decrease in accounts receivable 210
5. (4 Marks)
The most recent financial statements for ABC Inc. are shown here:
Income Statement Balance Sheet
Sales $3,400 Current Assets $4,400 Current Liabilities $880
Costs Fixed Assets 5,700 Long-term debt 3,580
Taxable Income $600 Equity $5,640
Taxes (34%) 204 Total $10,100 Total $10,100
Net income $396
Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. ABC Inc. maintains a constant 40% dividend payout ratio. Like every other firm in its industry, next year’s sales are projected to increase by exactly 20%. What is the external financing needed?
6. (2 marks) What is the future value of $25,000 received today if it is invested at 6.5% compounded annually for six years?
7. (2 marks) You are supposed to receive $2,000 five years from now. At an interest rate of 6%, what is that $2,000 worth today?
8. (2 marks) Granny puts $35,000 into a bank account earning 4%. You can’t withdraw the money until the balance has doubled. How long will you have to leave the money in the account?
9. (2 marks) Your grandfather placed $2,000 in a trust fund for you. In 10 years the fund will be worth $5,000. What is the rate of return on the trust fund?
10. (4 marks)
Suppose you are looking at the following possible cash flows (CF): Year 2 CF = $100; Year
3 CF =$200; Year 5 CF = $300; Year 6 CF=$400. The required discount rate is 5%
1) Draw the time line, mark out the time point and cash flows
2) What is the total value of the cash flows today? (keep two decimal points)
3) What is the total value of the cash flows at year 7? (keep two decimal points)
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