unit1-assignment-mba6016

Scanned by CamScannerCap ita l s ti rp lus 38 , 000, 000 Com mon stock ($1 par va lue) 8 , 700, 000 Prefe rre d sto c k 3 , 500, 000 Long - te rm d ebt $42 , 000, 000

eq u ity of Inform at ion Contro l Corp . one yea r ag o 7. Bu i l d i n g a B a l a n c e S h e et Th e fo l low ing ta b le p rese nts th e long

- te rm l ia b i l i t ie s a n d stoc k h olders ' co m pa n y

' s n e t c a p ita l s pen d i n g fo r 2014?

co m pa ny ' s 2014 in c o m e sta te m e nt s h ow e d a d e p rec i at io n ex p e n s e of $ 385 , 000. What w as th e

ass ets of $4 . 1 m i l l ion , a n d the 2014 ba lance sh eet h ow ed n t f i e d a s ts f $4 . 9 m i l l ion . The 6. Ca l c u l at i n g Net Ca p ita l S p e n d i n g p el l y D riv in g S c h oo l

' s 2013 ba lan c e s h e et sh ow ed net f ixed

a nd intere s t ex pe nse o f $1, o5o. If the tax rate is 4o p e rc e nt , w hat is th e op erating c ash f low , o r OCF?

5. Ca lc u lati n g OC F l i m s 나 n b , nc . , has sa les of $29, 200, c o s ts o í $10, 40 0, de prec iation exp ense of $1, 800,

the m arg in a l tax rate ? Ta b le 2 . 3 in th e c h a pte r, c a lc u late th e c o m pa ny

' s incom e taxes . What is t h e ave ra g e tax rate? What is

4. Ca l c u la t i n g Ta x e s T h e A l ex a n d e r c o . Had $315 , ooo in taxa b le i n c o m e . Us ing th e rates f rom

$1. 71 m i l l io n c a s h . what is th e b ook v a l u e of K l i n g o n ' s tota l as s ets tod a y? W h a t is th e m a rk et va lue?

w o rk in g c a p ita l of $32o , ooo. If a l l th e c u rre nt as sets w e re l i q u id ate d to d a y , the co m pa ny w o u ld receive

c u rre n t b a la nc e s h e et s h ow s ne t ħ xe d a s s ets of 64 . 2 m M on , c u r r e n t ha bMt ies of N . 4 m M on , a n d net

yea rs a g o for $7 m i l l io n . The m a c h in e ry ca n b e s o ld to t h e R o m u la n s to d ay fo r $ 5 . 6 m i l l io n . Klingon

' s

3. Ma r k e t v a l u e s a n d B o o k v a l u e s K l in g o n c ru is e rs , nc . , pu r c h as e d n ew c loa k i n g m a c

h i n e ry th ree e a rn i n g s ?

for th e f i rm ? s u p p o s e th e c o m p an y p a id o u t $62 , ooo in cash d iv i d e n d s . Wha t is th

e a d d it i o n to reta ined e xp e ns e of $ 45 , 1oo, inte re s t e x p e n s e of $ 2o , 7oo, a n d a

ta x ra te of 35 p e rc e n t . Wha t is th e n et i n come

2. Bu i l d i n g a n I n c o m e s t a t e m e n t M i l le r, nc . , has sa les of $675 , 300, c o s ts of $

297 , 800, de p rec iation eq u ity a c c ou nt for th is f i rm ? How m u c h is n e t w o r

k in g c a p ita l? c u rre n t l ia b i l i t i e s of 8 5 , 700, a n d lon g - term d e bt of $

12 , 900. What is th e va lu e of th e s h a re h o ld e rs

'1. Bu i l d i n g a B a l a n c e s h e e t R os e , Inc . , ha s c u rre nt a ss ets of $7 , 300, n e t

fixed a ssets of $26 , 200, P R O B L E M S

do you th i n k w a s th e b a s is fo r o u r c o n c l trs io n ?

Re fe r r i n g b a c k h th e M i c ro s o ft e xa m p le u

s e d a t t h e b e g i n n i n g

o f t h e c h a p t e r , n o te th at

w e s u g g e s te d th a t M ic ro s o ft '

s s toc k h o ld e rs p ro b ab ly d ld n

' t su ffe r a s a re s u lt of th e re p o rte d loss . What

In a g iv e n ye a r ? (H i n t : w s . ) Exp la i n h o w th ls m ig h t co m e

a bo u t . wha t a b o ut c a s h f low t

o c re d ito rs?ca s h F l o w to s to c k h o l d e rs a n d c re d i to rs c o u ld a c o m p a n y

'

s c a s h flow to s toc k h o

ld e rs b e n e g ative

be n e g a tiv e in a g iv e n ye a r? (H in t : Ye s . ) E x p la i n h o

w th ls m ig h t c o m e a b o

u t , Wha t a b o ut n e t c a p ita l8. Ne t w o r k tr g c a p i ta l a n d c a p i ta l s p e

n d i n g c o u ld a co n ì p a n y

' s c tl a n g o In n e t

w o rk i n g c a p i ta l

?. ope r a l \n g c a s h F l o w s u p p o so n co m p an y

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s o pe ra ti n g c a s h f lo w w a s

n e g n t lv e fo r s o v o rn l y e a rs

& c ah Flo w b o m As IH = s u p p o s l i \ c o mp 1n y

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s I H s ŁI flow fro m n ss

uts w ĺ\s n og a t vo fo r n p

a rt i c u lar

S, l ook v ah n » m u M a rk l .

vn i u e l 'n u u r s tn n đ n r d l

c c o \ n t i n g n i l tts , i l ls p os

s i b le fn r n c o n \ p ïrn y

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th e t a x y o u w o u l d p a y (i n p e r c e n p İ: y o . · Į r x H . , X

Įn ï ï r a k i n g ń n a n c i a l

d e c i s i o n s , i t i s f r e q u e n t l y i m p o r t a n t t o d i s t i n g u i s h b e t w e e n a v e r a g e a n d

m a r g i n a l t x r

a t e s . Y o u r a v e r a g e t a x r a t e i s y o u r t a x b i l l d i v i d e d b y y

o u r t a x a b l e i n c o m e , AVERAGE

VERSUS MA R GINAL TAX RATES i í - ă 18, 3

33, 334 + 35 15, 000, 001- 18, 333, 333 38

10, 000, 001- 15, 000, 00D 35

335, 001- 10, 000, 000 34

100, 001- 335, 000 39

34 75, 001- 1 00, 000

25 50, 001- 75, 000 15%

S O- 50, 000 Co rpo ra te Ta x 回国 一 二竺兰ゴ露四国

” ‘

-

贓 一园田团 团团国 “ “ .

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Net i n com e

Tax es (34%) 8, 704 Tax ab le in co m e $25, 600 Total - Tota l

Sal es $63, 000 Cu rren t assets $ 19, 000 Long - term d ebt 5 51, 000

IN COME S TATE ME N T BA LA N CE S HE E T

Sa l e s a n d Gr o w th Th e m ost r ec e nt f ina n c ia l s tatem e nts for W ey la n d Co . Are s h ow n h ere Wha t is th e extern a l f ina n c in g n e e d e d ? the com p a ny w is h es to m a in ta in a co nstant p ayo u t ratio . Nex t ye a r

' s s a les a re p rojected to b e $44, o8o,

Ass e ts a n d costs are p rop o rt io n a l to s a le s . Debt a nd eq u ity a re n ot . A div id e n d of $ 1, 340 was paid , and

Net in c o m e $ 6 138

Tax es (34%) 3 , 162

Tax a b le i n c om e $ 9, 300 Tota l W Tota l Costs 2 8 , 700

Equ ity Sa les $38 , 000 Ass ets $ 100 , 300

De b t $ 26 , 500

BALA NCE S HE E TłŁN COM E S TA T E M j j 4. EFN Th e m o s t re c e n t f in a n c ia l s ta te m e n ts for c o rn e l l , In c . , a re s h o w n

h e re

ra u o o f . 45. If its r et ur n on e q u i ty is 15 p e rc e n t, w ha t is i ts n e t i n c o m e ?

3. Us i n g t h e D u p o n t ïd e n t i l y Y3K , In c . , has s a tes of $ 5 , 720, to ta l a s s e ts o f $ 3 , 419, a n d a d ebt - equity

is 9 . 8 pe r ce n t a n d to ta l e q u ity is $85o , ooo. wnat is th e eq u ity m u lt ip l ie r ? Ret ur n o n e q u ity ? N et inc om e?

' '

Equ i ty M u lüp l ie r a n d R e h Jm o n E q u i ty Lo c k e r c o m p a n y h a s a d e b t - e q u iv ra tio of . 65. Return on assel

Pro fi t m a rg i n o f 5 . 8 pe rc e n t , w ha t is i ts R OE ?

1. Du p o n t łd e n ti y I TA lexa n d er, tn c . , has a n e q u ity m u lt ip l ie r of 1. 75, to ta l a ss e t t u rn o ve r o f 1 . 65, ar】d

N D P R O B L E M S

USe fu l th a n R OA in c o m p a ri n g tw o c o m p a n i e s ?

14. Ra ti o A n a łys i s c o n s i d e r th e ra tio E ß r r D A/As s e ts . wna t d oes th is ra tio te l l u s ? w h y m i g h t i t b e M orE

COm p a ri r l g tw o c o m p a n i e s ? W h y ?

13. co m p a r i n g R o E a n d R o A B o th R o E a n d R o A m e a s u re p ro f i ta b i l i ty . wh ic h o n e ïs m o re u s e fu l fo r

Ot ts tr i p s P ro d u c ti o n ?

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8. Ca l c u l a t i n g E F N T h e m o s t

r e c e n t t \n a n c \a \ s t a t e m e n t s t o r In c r e đ i b \ e t ? i b \ e s , \ n c . , a r e s rn o w n h e t e

Pa y o u t r a t i o 6 0 %

Eq u ity m u l t\p \ \e r 1 . 20

P r o f i t m a r g i n 7 . 1%

To t a l a s s e t t u r n o v e r 2 . 8o

7. s t s t a i n a b l e G

r o w t h A s s u m i n g U1e t o \\o w \n g r a t i o s a r e c o n s t a n t , w h a t i s th e s u s \a i n a b \ e g t o ? R t a l e ? s tj s t a i n

a b l e g r o w u 1 r a t e ?6. s u

s t a i n a b l e G r o w t h \ f t h e S G S C o r p . Ha s a 1 6 p e r c e n t o o 6 a n d a 2 5 p e r c e n t p a y o u t r a \ \ o , w h a \ \s \\s

X , . . ' " i n g o o n n w e q u i ty \s \s s u e d ? ^ ' " c':::' ' " 1 s t ' ' " ' " - e q \Ji tv r a t i o W h a t \s u ì e m a x \m u m \n r r e a s e \n s a \e s m M t ' , n n h c