For assignment #1 due1/22/17 from chapter 2:

Chapter 2: Financial Statements, Cash Flow and Taxes

Start the student with 8 points.

Then start deducting if they haven’t tried the following problems:

No attempt (just answer is not valid) on problem:
2-2 -1 pt
2-3 -1 pt
2-4 -1 pt
2-5 -1 pt
2-6 -1 pt
No section # -1 pt
No date -1 pt

If just name sheet submitted, award 3 points less

No section # -1 pt
No date -1 pt
2-2 Same
2-3 Same question different numbers:
 Net income=$6 million
 EBIT=$13 million
 Tax = 40%
2-4 Same question, different numbers:
 EBITDA = $8 million
 Net income = $2.4 million
 Interest expense = $2.0 million
 Tax = 40%
2-5 Same
2-6 Same question, different numbers
 Net income = $70 million
 Retained earnings = $900 million
 Previous retained earnings = $855 million
2-9 Same
2-10 Same
2-11 Same
2-12 Same

Chapter 3: Analysis of Financial Statements

Questions:
3-2 Same
3-3 Same
Problems:
3-2 Different Question:

“Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $25
million in long-term debt. What is the debt ratio?”

3-3 Same
3-4 Same question, company name different
3-6 Same question, different numbers
 ROA = 12%
 Profit Margin = 5%
 ROE = 20%
3-7 Same
3-8 Same question, different numbers
 Sales/Total Assets = 1.2
 ROA = 4%
 ROE = 7%
3-9 Same

3-10 Same question, different numbers

 Debt outstanding = $600,000
 Interest rate = 8%
 Annual Sales = $3 million
 Tax rate = 40%
 Profit Margin = 3%
 TIE ratio must be maintained at least 5 to 1
3-11 Different Question:

“Complete the balance sheet and sales information in the table that follows for J. White
Industries using the following financial data:

Total asset turnover: 1.5

Gross Profit Margin on Sales (sales – COGS)/sales = 25%
Total Liabilities to assets ratio; 40%
Quick ratio: .80
Days sales outstanding (based on 365-day year): 36.5 days
Inventory turnover ratio: 3.75

Partial income statement information:

Sales __________
COGS___________

Balance Sheet
Cash____________
A/R_________
Inventories____________
Fixed Assets _____________
Total Assets $400,000

A/P __________
LT debt $50,000
Common Stock __________
Retained Earnings $100,000
Total Liabilities and equity __________”

Chapter 12: Corporate Valuation and Governance – Used to be called “ Financial

Planning and Forecasting Financial Statements”
Questions:
12-2 Same
12-6 Same

Problems:
12-1 Same question, different numbers

“Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2013
to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013. Broussard is
already at full capacity, so its assets must grow at the same rate as projected sales. At the
end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts
payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin
is forecasted to be 6%, and the forecasted payout ratio is 40%. Use the AFN equation to
forecast Broussard’s additional funds needed for the coming year.”

12-2 Same question, different number

 Year-end 2013 assets = $7 million
12-3 Same question, different numbers
 Return to assumption that company had $5 million in assets at the end of 2013
 Company pays no dividends
12-4 Same question, different numbers

“Maggie’s Muffins, Inc., generated $5 million in sales during 2013, and its year-end total
assets were $2.5 million. Also, at year-end 2013, current liabilities were $1 million
consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of
accruals. Looking ahead to 2014, the company estimates that its assets must increase at
the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its
profit margin will be 7%, and its payout ratio will be 80% . How large a sales increase
can the company achieve without having to raise funds externally—that is, what is its
self-supporting growth rate?”

12-5 Same question, different numbers

“At year-end 2013, Wallace Landscaping’s total assets were $2.17 million and its
accounts payable were $560,000. Sales, which is 2013 were $3.5 million, are expected to
increased by 35% in 2014. Total assets and accounts payable are proportional to sales,
and that relationship will be maintained. Wallace typically uses no current liabilities other
than accounts payable. Common stock amounted to $625,000 in 2013, and retained
earnings were $395,000. Wallace has arranged to sell $195,000 of new financing needs.
The remainder of its financing needs will be met by issuing new long-term debt at the end
of 2014. (Because the debt is added at the end of the year, there will be no additional
interest expense due to the new debt.) Its net profit margin on sales is 5% and 45% of
earnings will be paid out as dividends.”
 a. Same
b. Same
12-8 Same

Chapter 6: Risk and Return – used to be called “Risk, Return and the Capital Asset
Pricing Model”

Questions:
6-3 Same

Problems:
6-1 Same question, different answers
 $20,000 invested in a stock with beta of .7
 $35,000 invested in a stock with a beta of 1.3

6-3 Same question, different numbers

 Risk-free rate = 5%
 Market risk premium = 7%
 Required return on:
o The market?
o A stock with a beta of 1.0?
o A stock with a beta of 1.7

6-6 Listed as problem 6-7 in the new book

6-8 Listed as problem 6-9 in the new book, with different numbers
 $5000 investment in each of 15 different common stocks
 portfolio’s beta is 1.2
 sell one stock with beta of .8 for $5,000 and use the proceeds to buy another stock
whose beta is 1.6

6-9 Listed as 6-10 in the new book

6-11 Listed as 6-12 in the new book

6-13 Listed as 6-14 in the new book, also only has a. b. and c. questions
24-6 Not in the new book