REVIEW TEST

MANAGERIAL FINANCE
2019/2020
Code: A
Instruction: Choose and answer 4 of these questions below

1. Presented below are the income statement of AMFITA Corp

In $
2018 2019 (expected growth
at 8%)
Sales $ 921,837,000
COGS $ 86,478,000
General and
Administrativ $ 78,963,000
e Expense
Other Expense $ 42,765,000
EBIT $ 713,631,000
Interest
$ 3,000,000
Expense
EBT $ 710,631,000
Tax Expense $ 284,252,400
EAT $ 426,378,600
Number of
outstanding 400,000,000
shares
EPS $ 1.07

a. Find the tax rate using the information above!

b. Calculate the DOL, DFL, and DTL
Notes: Assume that all of the expenses are fixed except for COGS and Other
Expenses which have a growth rate similar to sales.
 ANSWER :
a. Tax Rate
284.252.400
x 100=40 %
710.631.000

b. DOL, DFL, DTL

Expected growth at
  2018
8%
$ $
Sales
921,837,000 995,583,960
$ $
COGS
86,478,000 93,396,240
General and
$ $
Administrative
78,963,000 78,963,000
Expense
$ $
Other Expense
42,765,000 46,186,200
$ $
EBIT
713,631,000 777,038,520
$ $
Interest Expense
3,000,000 3,000,000
$ $
EBT
710,631,000 774,038,520
$ $
Tax Expense
284,252,400 309,615,408
$ $
EAT
426,378,600 464,423,112
Number of
outstanding 400,000,000 400,000,000
shares
$ $
EPS
1.07 1.16

Percentage of change in sales

995.583 .960−921.837 .000
=8 %
921.837.000
Percentage of change in EBIT
777.038.520−713.631.000
=8,885196972%
713.631 .000
Percentage of change in EPS
1,16−1,07
=8,411214953 %
1,07
 8,885196972 %
DOL= =1,110649622
8%
8,411214953 %
DFL= =0,9466548665
8,885196972 %
8,411214953 %
DTL= =1,051401869
8%

2. PT. Astra International Tbk. (ASII) wishes to measure its cost of common stock
equity. The firm’s stock is currently selling for Rp6,500. The dividends for the past 5
years are shown in the following table.

Year Dividend per Share (in Rupiah)

2014 152
2015 113
2016 113
2017 130
2018 154.13

After underpricing and flotation costs, ASII expects to net Rp5,000 per share on a
new issue. Instructions (Show only 4 numbers after the commas for your answers) ;

a. Determine the growth rate of dividends from 2014 to 2018.

b. Determine the net proceeds, Nn, that the firm will actually receive.
c. Determine the cost of retained earnings
d. Determine the cost of new common stock

ANSWER :
a. Growth Rate of Dividends from 2014 to 2018
1
FV
G= ( ) −1
PV
n

154.13 14
G= ( 152 )−1 = 0.3485%

b. Net Proceeds from issuance of new share, Nn

Nn = Market Price of Share – Underprice – Flotation Costs
 Nn = Rp5,000 (As stated in the problems)

c. Cost of Retained Earnings (rr)

rr = rs,

D1
rs= +G
P0

D 1=D 0 ×(1+G)
D1 = 154.13 x (1+0.3485%)
= 154.6671
P0 = Rp6,500
154.6671
rs= + 0.3485%
6,500

rs = 2.7280%

d. Cost of New Common Stock (rn)

D1
rn= +G
Nn
154.6671
rn= + 0.3485% = 3.4418%
5,000

3. Jason Bleigh is considering either leasing or purchasing a new machine that will cost
$28,000. The 4-year lease requires an initial payment of $3,400 and monthly
payments of $435. Purchasing requires a $3,250 down payment, sales tax of 5%, and
48 monthly payments of $415. He estimates the trade-in value of the new machine
will be $10,000 at the end of 4 years. Assuming that Jason can earn 4% annual
interest on his savings and is subject to a 5% sales tax on purchases, we can make a
reasonable recommendation to Jason using the following analysis (for simplicity,
ignoring the time value of money).
 ANSWER

Purchase Cost
Down Payment $ 3,250
Sales Tax $ 1,400
Total Loan Payment $ 19,920
Opportunity Cost of Down Payment $ 520
Less : Estimated Trade in Value of Machine at the end of loan$ 10,000
Total cost of purchasing $ 15,090

Lease Cost
Down Payment $ 3,400
Total Lease Payment $ 20,880
Opportunity Cost of Down Payment $ 544
Total cost of leasing $ 24,824
Purchase the machine is recommended for Jason Bleigh

4. Delphi Company, a forest products concern, had 200,000 shares of $2-par-value

common stock and no preferred stock outstanding. Because the stock is selling At a
high market price, the firm has declared a 2-for-1 stock split. Company’s stock is
currently traded at $10 per share.

a. How is the effect that occurs on par value, market value, outstanding share, and
common stock after the company makes a stock split?
b. Assume net income of the firm is $200.000, How will the stockholders’ equity
account change if Delphi Company pays a 10% stock dividend, and How will the
stockholders’ equity account change if the company pays cash dividend with
25% Dividend Payout Ratio?
ANSWER
a. Effect after stocksplit
Sebelum Sesudah
Par Value 2 1
Outstanding Share 200000 400000
Common Stock 400000 400000
Market Price 10 5
 b. Cash Dividend
CASH DIVIDEND
Formula Hasil
Common Stock outstanding shares x par $ 400,000.00

Share Premium $ 4,000,000.00

Retained Earnings RE lama - Cash dividend $ 1,950,000.00

Total Shareholder Equity $ 6,350,000.00

Stock Dividend
Stock dividend yang akan dibagikan
Tuliskan rumusnya di sini
40000
%stock dividend x O/S

STOCK DIVIDEND
Formula Hasil
Common Stock (O/S lama + O/S baru) x par $ 440,000.00

Share Premium PIC lama +(MP-Par) $ 4,160,000.00

Retained Earnings RE lama - (O/S baru x MP) $ 1,800,000.00

Total Shareholder Equity $ 6,400,000.00

5. Shelby Computing is in negotiations with Ponting Consulting. Currently, Shelby

Computing is considering swapping 0.4 shares of Shelby Computing for each share of
Ponting Consulting. Shelby Computing has sufficient authorized but unissued shares
to carry out the proposed merger. Additional financial data are summarized in the
following table.

Shelby Computing and Ponting Consulting Financial Data

Shelby Ponting
Item
Computing Consulting
Earnings Available for Common Stock $ 200,000 $ 50,000
Number of shares of common stock 50,000 20,000
outstanding
Earnings Per Share (EPS) $4 $ 2.5
Market Price per Share $ 60 $25
Price/Earnings (P/E) Ratio 15 10

a. How many new shares of stock will Shelby Computing have to issue to make the
proposed merger?
 b. If the earnings for each firm remain unchanged, what will be the post-merger
earnings per share for Shelby Computing?
c. How much, effectively, has been earned on behalf of each of the original shares of
Ponting Consulting’s stock?
d. How much, effectively, has been earned on behalf of each of the original shares of
Shelby Computing’s stock?

ANSWER
a. 20,000 x 0.4 = 8,000 new shares
b. ($200,000 + $50,000) ÷ 58,000 = $4.31 per share
c. $ 4.31 x 0.4 = $1.72 per share
d. $4.31 per share

6. Dynabase Tool has forecast its total funds requirements for the coming year as shown
in the following table

a. Divide the firm’s monthly funds requirement into (1) a permanent component and
(2) a seasonal component, and find the monthly average for each of these
components.
b. Describe the amount of long-term and short-term financing used to meet the total
funds requirement under (1) an aggressive funding strategy and (2) a conservative
funding strategy. Assume that, under the aggressive strategy, long-term funds
finance permanent needs and short-term funds are used to finance seasonal needs.
short-term funds cost 5% annually and that the cost of long-term funds is 10%
annually, Assume that the firm can earn 3% on any excess cash balances.
 ANSWER
a. Permanent, Seasonal, Average

Estimated Permanent
Month Seasonal Requirement (Rp 000)
Requirement (Rp Requirement (Rp
January Rp 2,000,000 Rp 2,000,000 Rp -
February Rp 2,000,000 Rp 2,000,000 Rp -
March Rp 2,000,000 Rp 2,000,000 Rp -
April Rp 4,000,000 Rp 2,000,000 Rp 2,000,000
May Rp 6,000,000 Rp 2,000,000 Rp 4,000,000
June Rp 9,000,000 Rp 2,000,000 Rp 7,000,000
July Rp 12,000,000 Rp 2,000,000 Rp 10,000,000
August Rp 14,000,000 Rp 2,000,000 Rp 12,000,000
September Rp 9,000,000 Rp 2,000,000 Rp 7,000,000
October Rp 5,000,000 Rp 2,000,000 Rp 3,000,000
November Rp 4,000,000 Rp 2,000,000 Rp 2,000,000
Desember Rp 3,000,000 Rp 2,000,000 Rp 1,000,000
Total seasonal Requirement Rp 48,000,000
Permanent Requirement Kebutuhan terendah Rp 2,000,000
Seasonal Requirement 0-12.000.000
Average Seasonal Req 48.000.000/12 Rp 4,000,000
Total Requirement Kebutuhan Tertinggi Rp 14,000,000

b. Aggressive and Conservative

 Aggressive Strategy
Average seasonal
Cost of Short Term Debt req x Cost of STD Rp 200,000.00
%
Permanent Req x
Cost of Long Term Debt Rp 200,000.00
Cost of LTD %
Total Cost Rp 400,000.00

Conservative Strategy
Cost of Short Term Debt 0 x cost of STD% Rp -
Total Req x cost of
Cost of Long Term Debt Rp 1,400,000.00
LTD%
(Total Req -
Average seasonal
Earning on Surplus Balance -Rp 240,000
req - Permanent
req) x Return
Total Cost Rp 1,160,000.00