| FIN 355 MIDTERM | | | | NAME: |
| INSTRUCTIONS: USE THIS FORM AND PLACE ALL EMBEDDED FORMULAS IN THE APPROPRIATE BLUE CELL. RETURN TO ME VIA EMAIL. PLACE ALL OF YOUR WORK ON THE WORKSHEET AS PROVIDED. YOU MAY ADD AS MANY WORKSHEETS AS YOU DESIRE, BUT PLEASE LABEL THEM FOR MY REFERENCE. |
| 1 | The Acme Widget Company has total sales of $5,591. Given the following ratios, fill in the balance sheet. (All figures in $millions). |
| | Total Assets Turnover | | | 1.313 | Times |
| | Fixed Asset Turnover Ratio | | | 5.723 | Times |
| | Cash to Total Assets | | | 10.9% |
| | Accounts Reeivable Turnover | | | 7.80 | Times |
| | Inventory Turnover | | | 11.03 | Times |
| | Current Ratio | | | 0.852 |
| | Debt to Total Assets | | | 54.3% | | | | | | | | - 0 |
| | Quick Ratio | | | 0.503 |
| | Common Stock | | | $ 1.21 | Par Value /Share |
| | ACME WIDGET COMPANY |
| | | ASSETS | | | | LIABILITIES & SHAREHOLDER'S EQUITY |
| | Cash | | | | | | Accts Payable |
| | Accounts Receivable | | | | | | Short Term Portion |
| | Inventory | | | | | | Long Term Debt |
| | Total Current Assets | | | | | | Total Current Liabilities |
| | Property, Plant & Eqt | | | | | | Long-term Debt |
| | Goodwill, Other Intangibles | | | | | | Other Liabiities |
| | | | | | | | Common Stock |
| | | | | | | | Retained Earnings | | | $ 2,031 |
| | | | | | | | Treasury Stock | | | $ (2,036) |
| | TOTAL ASSETS | | | | | | TOTAL LIAB & SH EQUITY |
| 2 | The Income Statement Acme Widget is as follows (figures in $millions). Please prepare a 5-year forecast bsed on the assumptions provided: |
| | | | | | | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
| | Sales (20,000 units at $60 each) | | | | | $ 5,468 | $ 5,623 | $ 5,591 |
| | COGS (Variable Cost at $30 each) | | | | | $ 3,164 | $ 3,211 | $ 3,231 |
| | Gross Profit | | | | | $ 2,304 | $ 2,412 | $ 2,360 | $ - 0 | $ - 0 | $ - 0 | $ - 0 | $ - 0 |
| | Operating Expenses |
| | Research & Development | | | | | $ 121 | $ 130 | $ 125 |
| | Selling, Gen & Admin Costs | | | | | $ 1,280 | $ 1,307 | $ 1,269 |
| | Total Operating Expenses | | | | | $ 1,401 | $ 1,437 | $ 1,394 |
| | Gross Operating Income | | | | | $ 903 | $ 975 | $ 966 | $ - 0 | $ - 0 | $ - 0 | $ - 0 | $ - 0 |
| | Other Income (Loss) | | | | | $ 13 | $ - 0 | $ (2) |
| | EBITA | | | | | $ 916 | $ 975 | $ 964 | $ - 0 | $ - 0 | $ - 0 | $ - 0 | $ - 0 |
| | Interest Expense | | | | | $ 125 | $ 122 | $ 103 |
| | Income Tax Expense | | | | | $ 248 | $ 279 | $ 299 |
| | NOPAT | | | | | $ 543 | $ 574 | $ 562 | $ - 0 | $ - 0 | $ - 0 | $ - 0 | $ - 0 |
| | Shares Outstanding (in 1,000s) | | | | | 132,310 | 132,969 | 131,742 |
| | EPS |
| | Terminal Value |
| 3 | Note the following informatin for the corporation in Problem 1: |
| | b: | 0.59 |
| | Exp Mkt R: | 9.50% |
| | Rf | 3.50% |
| | LONG-TERM DEBT: | | | | Current Price | % of Total Debt |
| | 5% Sub Notes due 1/15 | | | | $ 1,095.24 | 26.4% |
| | 3.55% Senior Debentures Due 11/15 | | | | $ 934.21 | 13.7% |
| | 5.95% Senior Debs Due 10/17 | | | | $ 1,202.02 | 18.8% |
| | 3.80% Senior Notes Due 11/21 | | | | $ 962.03 | 13.6% |
| | 3.05% Senior Debentures Due 9/22 | | | | $ 938.46 | 27.5% |
| | | | | | | 100.0% |
| | The corporation's WACC is: |
| 4 | What is the corportion'scurrent ROE? |
| 5 | What is your estimate of the corporation's current stock price? It's P/E ratio? |
| | Stock Price: | | | P/E Ratio: |
| | Briefly exlain how you reached your conclusion. |
| 6 | ONE LAST QUESTION! |
| | Suppose Acme Widgets decides to issue another $250 million in subordinated notes, due 12/19, at a rate of 5.5%. Management will use the proceeds to buy back stock. If the stock is trading at $100/share, what effect will this have on the company's WACC? What will the new WACC if it is different? |
| | New WACC |
mes.amer
practice_q_for_midterm.xlsx
