Liberty University BUSI 420 Homework 7 Performance Evaluation and Pro Forma
Financials Assignment answers new A+
Problem 19-17 Full-Capacity Sales (LO4, CFA9)
Thorpe Manufacturing, Incorporated, is currently operating at only 86
percent of fixed asset capacity. Current sales are $320,000. How fast can
sales grow before any new fixed assets are needed?
Note: Do not round intermediate calculations. Enter your
answer as a percent rounded to 2 decimal places.
Problem 19-14 Calculating Per-Share Measures (LO3, CFA6)
Amounts are in thousands of dollars (except number of shares and price
per share):
Kiwi Fruit Company Balance Sheet
Cash and equivalents $ 490
Operating assets 790
Property, plant, and equipment 3,200
Other assets 180
Total assets $ 4,660
Current liabilities $ 1,040
Long-term debt 1,510
Other liabilities 190
Total liabilities $ 2,740
Paid in capital $ 410
Retained earnings 1,510
Total equity $ 1,920
Total liabilities and equity $ 4,660
Kiwi Fruit Company Income Statement
Net sales $ 8,600
Cost of goods sold −6,900
Gross profit $ 1,700
Operating expense −620
Operating income $ 1,080
Other income 175
Net interest expense −200
Pretax income $ 1,055
Income tax −265
Net income $ 790
Earnings per share $ 2.00
Shares outstanding 395,000
Recent price $ 44.50
Kiwi Fruit Company Cash Flow Statement
Net income $ 790
Depreciation and amortization 214
Increase in operating assets −115
Decrease in current liabilities −130
Operating cash flow $ 759
Net (purchase) sale of property $ 215
Increase in other assets −76
Investing cash flow $ 139
Net (redemption) issuance of Limited−$ 202
Dividends paid −188
Financing cash flow −$ 390
Net cash increase 508
Calculate the price-book, price-earnings, and price-cash flow ratios for Kiwi
Fruit.
Note: Do not round intermediate calculations. Round your
answers to 2 decimal places.
Problem 19-13 Calculating Profitability Measures (LO3, CFA6)
Amounts are in thousands of dollars (except number of shares and price
per share):
Kiwi Fruit Company Balance Sheet
Cash and equivalents $ 620
Operating assets 800
Property, plant, and equipment 3,200
Other assets 185
Total assets $ 4,805
Current liabilities $ 1,040
Long-term debt 1,635
Other liabilities 195
Total liabilities $ 2,870
Paid in capital $ 415
Retained earnings 1,520
Total equity $ 1,935
Total liabilities and equity $ 4,805
Kiwi Fruit Company Income Statement
Net sales $ 8,100
Cost of goods sold −6,700
Gross profit $ 1,400
Operating expense −400
Operating income $ 1,000
Other income 180
Net interest expense −200
Pretax income $ 980
Income tax −270
Net income $ 710
Earnings per share $ 2.00
Shares outstanding 355,000
Recent price $ 33.00
Kiwi Fruit Company Cash Flow Statement
Net income $ 710
Depreciation and amortization 212
Increase in operating assets −120
Decrease in current liabilities −128
Operating cash flow $ 674
Net (purchase) sale of property $ 220
Increase in other assets −77
Investing cash flow $ 143
Net (redemption) issuance of Limited−$ 203
Dividends paid −190
Financing cash flow −$ 393
Net cash increase 424
Calculate ROA and ROE for Kiwi Fruit.
Note: Do not round intermediate calculations. Enter your
answers as a percent rounded to 2 decimal places.
Problem 19-12 Calculating Margins (LO3, CFA6)
Amounts are in thousands of dollars (except number of shares and price
per share):
Kiwi Fruit Company Balance Sheet
$ 470
Cash and equivalents
Operating assets 730
Property, plant, and equipment 2,900
Other assets 150
Total assets $ 4,250
Current liabilities $ 980
Long-term debt 1,280
Other liabilities 160
Total liabilities $ 2,420
Paid in capital $ 380
Retained earnings 1,450
Total equity $ 1,830
Total liabilities and equity $ 4,250
Kiwi Fruit Company Income Statement
Net sales $ 9,600
Cost of goods sold −7,600
Gross profit $ 2,000
Operating expense −950
Operating income $ 1,050
Other income 145
Net interest expense −200
Pretax income $ 995
Income tax −235
Net income $ 760
Earnings per share $ 2.00
Shares outstanding 380,000
Recent price $ 42.50
Kiwi Fruit Company Cash Flow Statement
Net income $ 760
Depreciation and amortization 228
Increase in operating assets −90
Decrease in current liabilities −118
Operating cash flow $ 780
Net (purchase) sale of property $ 185
Increase in other assets −70
Investing cash flow $ 115
Net (redemption) issuance of Limited−$ 174
Dividends paid −176
Financing cash flow −$ 350
Net cash increase 545
Calculate the gross and operating margins for Kiwi Fruit.
Note: Do not round intermediate calculations. Enter your
answers as a percent rounded to 2 decimal places.
Problem 19-11 EFN (L04, CFA8)
The most recent financial statements for Martin, Incorporated, are shown
here:
Income Statement
Sales $ 28,000
Costs −16,800
Taxable income$ 11,200
Taxes (21%) −2,352
Net income $ 8,848
Balance Sheet
Assets $ 114,800 Debt $ 60,000
) ) Equity 54,800
Total$ 114,800 Total$ 114,800
Assets and costs are proportional to sales. Debt and equity are not. A
dividend of $895 was paid, and Martin wishes to maintain a constant
payout ratio. Next year’s sales are projected to be $33,040. What is the
external financing needed?
Note: Do not round intermediate calculations. Round your
answer to 2 decimal places.
Problem 19-10 Cash Flow Statement (LO2, CFA5)
Net income: $ 224
Depreciation: $ 49
Issuance of new stock: $ 7
Repurchase of debt: $ 18
Sale of property: $ 18
Purchase of equipment: $ 80
Dividend payments: $ 5
Interest payments: $ 29
Given the above information for Hetrich, Incorporated, calculate the
operating cash flow, investment cash flow, financing cash flow, and net
cash flow.
Note: A negative value should be indicated by a minus
sign. Do not round intermediate calculations. Round your
answers to the nearest whole number.
Problem 19-9 Addition to Retained Earnings (LO2, CFA8)
Lemon Company has net income of $580,000 and 60,000 shares of stock.
If the company pays a dividend of $3.15 per share, what are the additions
to retained earnings?
Note: Do not round intermediate calculations. Round your
answer to the nearest whole number.
Problem 19-8 Earnings per Share (LO3, CFA3)
Alphonse, Incorporated, has a return on equity of 12 percent, 64,000
shares of stock outstanding, and a net income of $168,000. What are
earnings per share?
Note: Do not round intermediate calculations. Round your
answer to 2 decimal places.
Problem 19-7 Operating Cash Flow (LO3, CFA5)
Weston Corporation had earnings per share of $1.71, depreciation expense
of $636,000, and 240,000 shares outstanding. What was the operating
cash flow per share? If the share price was $63, what was the price-cash
flow ratio?
Note: Do not round intermediate calculations. Round your
answers to 2 decimal places.
Problem 19-6 Calculating EFN (LO4, CFA8)
The most recent financial statements for Bradley, Incorporated, are shown
here (assuming no income taxes):
Income Statement
Sales $ 5,800
Costs −3,480
Net income$ 2,320
Balance Sheet
Assets $ 18,560 Debt $ 11,000
) ) Equity 7,560
Total$ 18,560 Total$ 18,560
Assets and costs are proportional to sales. Debt and equity are not. No
dividends are paid. Next year’s sales are projected to be $6,554. What is
the external financing needed?
Note: A negative value should be indicated by a minus
sign. Do not round intermediate calculations. Round your
answer to the nearest whole number.
Problem 19-5 Price Ratios (LO3, CFA6)
You are given the following information for Smashville, Incorporated.
Cost of goods sold:$ 259,000
Investment income: $ 3,100
Net sales: $ 402,000
Operating expense: $ 94,000
Interest expense: $ 7,400
Dividends: $ 11,000
Tax rate: 21%
Current liabilities: $ 20,000
Cash: $ 21,000
Long-term debt: $ 7,000
Other assets: $ 39,000
Fixed assets: $ 134,000
Other liabilities: $ 5,000
Investments: $ 15,000
Operating assets: $ 26,000
During the year, Smashville, Incorporated, had 17,000 shares of stock
outstanding and depreciation expense of $17,000. At the end of the year,
Smashville stock sold for $65 per share. Calculate the price-book ratio,
price-earnings ratio, and price-cash flow ratio.
Note: Do not round intermediate calculations. Round your
answers to 2 decimal places.
Problem 19-4 Per-Share Ratios (LO3, CFA6)
You are given the following information for Smashville, Incorporated.
Cost of goods sold:$ 174,000
Investment income: $ 1,400
$ 379,000
Net sales:
Operating expense: $ 86,000
Interest expense: $ 7,400
Dividends: $ 8,000
Tax rate: 21%
Current liabilities: $ 21,000
Cash: $ 21,000
Long-term debt: $ 46,000
Other assets: $ 38,000
Fixed assets: $ 130,000
Other liabilities: $ 3,000
Investments: $ 34,000
Operating assets: $ 64,000
During the year, Smashville, Incorporated, had 25,000 shares of stock
outstanding and depreciation expense of $15,000. Calculate the book value
per share, earnings per share, and cash flow per share.
Note: Do not round intermediate calculations. Round your
answers to 2 decimal places.
Problem 19-3 Performance Ratios (LO3, CFA6)
You are given the following information for Smashville, Incorporated.
Cost of goods sold:$ 179,000
Investment income: $ 1,500
Net sales: $ 364,000
Operating expense: $ 78,000
Interest expense: $ 7,400
Dividends: $ 12,000
Tax rate: 21%
Current liabilities: $ 18,000
Cash: $ 21,000
$ 45,000
Long-term debt:
Other assets: $ 39,000
Fixed assets: $ 160,000
Other liabilities: $ 4,000
Investments: $ 35,000
Operating assets: $ 64,000
Calculate the gross margin, the operating margin, return on assets, and
return on equity.
Note: Do not round intermediate calculations. Enter your
answers as a percent rounded to 2 decimal places.
Problem 19-2 Balance Sheets (LO2, CFA4)
Given the following information for Smashville, Incorporated, construct a
balance sheet:
Current liabilities: $ 35,000
Cash: $ 21,000
Long-term debt: $ 99,000
Other assets: $ 36,000
Fixed assets: $ 163,000
Other liabilities: $ 18,000
Investments: $ 40,000
Operating assets: $ 35,000
Problem 19-1 Income Statements (LO2, CFA3)
Given the following information for Smashville, Incorporated, construct an
income statement for the year:
Cost of goods sold:$ 224,000
Investment income: $ 2,400
Net sales: $ 489,000
Operating expense: $ 90,000
Interest expense: $ 7,400
Dividends: $ 15,000
Tax rate: 21%
What are retained earnings for the year?
Note: Input all amounts as positive values.
Problem 13-20 Jensen's Alpha (LO1, CFA5)
You have been given the following return information for a mutual fund, the
market index, and the risk-free rate. You also know that the return
correlation between the fund and the market is 0.87.
Year Fund Market Risk-Free
2018−18.20% −35.50% 2%
2019 25.10 20.60 5
2020 13.50 12.70 2
2021 6.80 8.40 6
2022 −1.86 −4.20 3
Calculate Jensen’s alpha for the fund, as well as its information ratio.
Note: Do not round intermediate calculations. Enter the
alpha as a percent rounded to 2 decimal places. Round the
ratio to 4 decimal places.
Problem 13-19 Performance Metrics (LO1, CFA5)
You have been given the following return information for a mutual fund, the
market index, and the risk-free rate. You also know that the return
correlation between the fund and the market is 0.97.
Year Fund Market Risk-Free
2018−15.8% −31.5% 3%
2019 25.1 20.2 5
2020 13.1 11.5 2
2021 7.6 8.0 5
Year Fund Market Risk-Free
2022−1.62 −3.2 3
What are the Sharpe and Treynor ratios for the fund?
Note: Do not round intermediate calculations. Round your
answers to 4 decimal places.
Problem 13-14 Value-at-Risk (VaR) Statistic (LO4,
CFA2)
a. A stock has an annual return of 10.2 percent and a standard
deviation of 60 percent. What is the smallest expected gain over the
next year with a probability of 5 percent?
Note: Do not round intermediate calculations. Round the z-score value to 3
decimal places when calculating your answer. Enter your answer as a percent
rounded to 2 decimal places.
b. Does this number make sense?
Problem 13-13 Value-at-Risk (VaR) Statistic (LO4, CFA2)
a. A stock has an annual return of 11 percent and a standard
deviation of 44 percent. What is the smallest expected loss
over the next year with a probability of 1 percent?
Note: A negative value should be indicated by a
minus sign. Do not round intermediate calculations.
Round the z-score value to 3 decimal places when
calculating your answer. Enter your answer as a
percent rounded to 2 decimal places.
b. Does this number make sense?
Problem 13-6 Information Ratio (LO1, CFA5)
The Layton Growth Fund has an average return that is 2.1 percent higher
than the market benchmark. You have determined that Layton’s information
ratio is 0.50. What must Layton’s tracking error be relative to its
benchmark?
Note: Enter your answer as a percent rounded to 2
decimal places.
Problem 13-3 Performance Evaluation (LO1, CFA5)
You are given the following information concerning three portfolios, the
market portfolio, and the risk-free asset:
Portfolio Rpσpβp
X15.5% 37% 1.65
Y14.5 32 1.30
Z8.2 22 0.80
Market 10.8 27 1.00
Risk-free 6.4 0 0
What are the Sharpe ratio, Treynor ratio, and Jensen’s alpha for each
portfolio?
Note: A negative value should be indicated by a minus
sign. Leave no cells blank - be certain to enter "0"
wherever required. Do not round intermediate
calculations. Round your ratio answers to 5 decimal
places. Enter your alpha answers as a percent rounded to
2 decimal places.
Problem 13-2 Standard Deviation (LO4, CFA2)
You find the monthly standard deviation of a stock is 9.40 percent. What is
the annual standard deviation of the stock?
Note: Do not round intermediate calculations. Enter your
answer as a percent rounded to 2 decimal places.
Problem 13-1 Standard Deviation (LO4, CFA2)
You find a particular stock has an annual standard deviation of 34 percent.
What is the standard deviation for a three-month period?
Note: Do not round intermediate calculations. Enter your
answer as a percent rounded to 2 decimal places.
