Question 1:
Thelma and Louie, Inc., started the year with a balance of retained earnings of $547 million and ended the year with retained earnings of $594 million. The company paid dividends of $37 million to the preferred stockholders and $77 million to common stockholders.
Calculate Thelma and Louie's net income for the year. (Enter your answer in millions of dollars.)
Question 2:
Consider a firm with an EBIT of $11,300,000. The firm finances its assets with $51,600,000 debt (costing 7.3 percent) and 10,800,000 shares of stock selling at $8.00 per share. The firm is considering increasing its debt by $25,800,000, using the proceeds to buy back shares of stock. The firm is in the 30 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $11,300,000.
Calculate the EPS before and after the change in capital structure and indicate changes in EPS.
Question 3:
Muffin's Masonry, Inc.'s, balance sheet lists net fixed assets as $28.00 million. The fixed assets could currently be sold for $47.00 million. Muffin's current balance sheet shows current liabilities of $12.50 million and net working capital of $11.50 million. If all the current accounts were liquidated today, the company would receive $7.95 million cash after paying the $12.50 million in current liabilities.
What is the book value of Muffin's Masonry's assets today and the market value of these assets? (Enter your answers in millions of dollars rounded to 2 decimal places.)
Question 4:
Use the balance sheet and income statement below:
VALIUM'S MEDICAL SUPPLY CORPORATION
Balance Sheet as of December 31, 2015 and 2014
(in thousands of dollars)
|
|
2015
|
2014
|
|
2015
|
2014
|
|
Assets
|
|
|
Liabilities and Equity
|
|
|
|
Current assets:
|
|
|
Current liabilities:
|
|
|
|
Cash and marketable securities
|
5 90
|
$ 89
|
Accrued wages and taxes
|
$ 66
|
$ 59
|
|
Accounts receivable
|
208
|
199
|
Accounts payable
|
168
|
159
|
|
Inventory
|
330
|
309
|
Notes payable
|
149
|
149
|
|
Total
|
$ 628
|
$ 597
|
Total
|
$ 383
|
$ 367
|
|
Fixed assets:
|
|
|
Long-term debt:
|
$ 656
|
$ 592
|
|
Gross plant and equipment
|
$1,127
|
$ 918
|
Stockholders' equity:
|
|
|
|
Less: Depredation
|
182
|
131
|
Preferred stock (6 thousand shares)
|
$ 6
|
$ 6
|
|
|
|
|
Common stock and paid-in surplus
|
120
|
120
|
|
Net plant and equipment
|
$ 945
|
$ 787
|
(100 thousand shares)
|
|
|
|
Other long-term assets
|
170
|
170
|
Retained earnings
|
578
|
469
|
|
Total
|
$1,115
|
$ 957
|
Total
|
$ 704
|
$ 595
|
|
Total assets
|
$1,743
|
$1,554
|
Total liabilities and equity
|
$1,743
|
$1,554
|
VALIUM'S MEDICAL SUPPLY CORPORATION
Income Statement for Years Ending December 31, 2015 and 2014
(in thousands of dollars)
|
|
2015
|
2014
|
|
Net sales
|
$ 928
|
$ 838
|
|
Less: Cost of goods sold
|
407
|
370
|
|
Gross profits
|
$ 521
|
$ 468
|
|
Less: Other operating expenses
|
65
|
59
|
|
Earnings before interest, taxes, depredation, and amortization (EBITDA)
|
$ 456
|
$ 409
|
|
Less: Depredation
|
51
|
49
|
|
Earnings before interest and taxes (EBIT)
|
$ 405
|
$ 360
|
|
Less: Interest
|
66
|
60
|
|
Earnings before taxes (EBT)
|
$ 339
|
$ 300
|
|
Less: Taxes
|
149
|
129
|
|
Net income
|
$ 190
|
$ 171
|
|
Less: Preferred stock dividends
|
|
|
|
$ 6
|
$ 6
|
|
Net income available to common stockholders
|
$ 184
|
$ 165
|
|
Less: Common stock dividends
|
75
|
75
|
|
Addition to retained earnings
|
$ 109
|
$ 90
|
|
Per (common) share data:
|
|
|
|
Earnings per share (EPS)
|
$ 1.84
|
$ 2
|
|
Dividends per share (DPS)
|
$ 0.75
|
$ 0.75
|
|
Book value per share (BVPS)
|
$ 6.98
|
$ 5.89
|
|
Market value (price) per share (MVPS)
|
$ 8.01
|
$ 6.37
|
Prepare a statement of cash flows for Valium's Medical Supply Corporation. (Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign. Leave no cells blank -be certain to enter "0" wherever required.)
Question 5:
Last year, K9 WebbWear, Inc., reported an ROE of 18 percent. The firm's debt ratio was 50 percent, sales were $20 million, and the capital intensity was 1.25 times. This year, K9 WebbWear plans to increase its debt ratio to 60 percent. The change will not affect sales or total assets, however, it will reduce the firm's profit margin to 11 percent.
Calculate the net income and profit margin for K9 WebbWear last year. (Enter your answer in millions of dollars rounded to 2 decimal places. Round your percentage answer to 2 decimal places.)
By how much will the change in K9 WebbWear's debt ratio affect its ROE?
Question 6:
Use the following financial statements for Lake of Egypt Marina, Inc.LAKE OF EGYPT MARINA, INC
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)
|
|
2015
|
2014
|
|
2015
|
2014
|
|
Assets
Current assets:
|
|
|
Liabilities and Equity Current liabilities:
|
|
|
|
Cash and marketable securities
|
$ 50
|
$ 28
|
Accrued wages and taxes
|
$ 30
|
$ 28
|
|
Accounts receivable
|
70
|
44
|
Accounts payable
|
55
|
48
|
|
Inventory
|
126
|
112
|
Notes payable
|
35
|
44
|
|
Total
|
$ 246
|
$ 184
|
Total
|
$ 120
|
$ 120
|
|
Fixed assets:
|
|
|
Long term debt:
|
$ 31
|
$ 134
|
|
Gross plant and equipment
|
$ 320
|
$ 248
|
Stockholders' equity:
|
|
|
|
Less: Depreciation
|
91
|
56
|
Preferred stock (2 million shares)
|
$ 2
|
$ 2
|
|
|
|
|
Common stock and paid in
|
|
|
|
|
|
|
surplus
|
40
|
40
|
|
|
|
|
(40 million shares)
|
|
|
|
Net plant and equipment
|
$ 229
|
$ 192
|
Retained earnings
|
307
|
104
|
|
Other long term assets
|
25
|
24
|
|
|
|
|
Total
|
$ 254
|
$ 216
|
Total
|
$ 349
|
$ 146
|
|
Total assets
|
$ 500
|
$ 400
|
Total liabilities and equity
|
$ 500
|
$ 400
|
LAKE OF EGYPT MARINA, INC.
Income Statement for Years Ending December 31, 2015 and 2014
(in millions of dollars)
|
|
2015
|
2014
|
|
Net sales (all credit)
|
$ 700
|
$ 500
|
|
Less: Cost of goods sold
|
245
|
150
|
|
Gross profits
|
$ 455
|
$ 350
|
|
Less: Other operating expenses
|
42
|
25
|
|
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
|
413
|
325
|
|
Less: Depreciation
|
35
|
20
|
|
Earnings before interest and taxes (EBIT)
|
$ 378
|
$ 305
|
|
Less: Interest
|
28
|
25
|
|
Earnings before taxes (EBT)
|
$ 350
|
$ 280
|
|
Less: Taxes
|
105
|
84
|
|
Net income
|
$ 245
|
$ 196
|
|
Less: Preferred stock dividends
|
|
|
|
$ 2
|
$ 2
|
|
Net income available to common stockholders
|
$ 243
|
$ 194
|
|
Less: Common stock dividends
|
40
|
40
|
|
Addition to retained earnings
|
$ 203
|
$ 154
|
|
Per (common) share data:
|
|
|
|
Earnings per share (EPS)
|
$ 6.075
|
$ 4.850
|
|
Dividends per share (DPS)
|
$ 1.000
|
$ 1.000
|
|
Book value per share (BVPS)
|
$ 8.675
|
$ 3.600
|
|
Market value (price) per share (MVPS)
|
$ 14.900
|
$ 9.000
|
Spread the balance sheets of Lake of Egypt Marina, Inc., for 2015 and 2014. (Be sure to list the assets and liabilities in order of their liquidity. Input all amounts as positive values. Round your answers to 2 decimal places.)
Spread the income statements of Lake of Egypt Marina, Inc., for 2015 and 2014.
Question 7:
Use the following financial statements for Lake of Egypt Marina, Inc.
LAKE OF EGYPT MARINA, INC.
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)
|
|
2015
|
2014
|
|
2015
|
2014
|
|
Assets
Current assets:
|
|
|
Liabilities and Equity Current liabilities:
|
|
|
|
Cash and marketable securities
|
$ 50
|
$ 56
|
Accrued wages and taxes
|
$ 50
|
$ 48
|
|
Accounts receivable
|
60
|
52
|
Accounts payable
|
55
|
44
|
|
Inventory
|
205
|
96
|
Notes payable
|
60
|
40
|
|
Total
|
$ 315
|
$ 204
|
Total
|
$ 165
|
$ 132
|
|
Fixed assets:
|
|
|
Long term debt:
|
$ 42
|
$ 136
|
|
Gross plant and equipment
|
$ 250
|
$ 232
|
Stockholders' equity:
|
|
|
|
Less: Depredation
|
90
|
60
|
Preferred stock (4 million shares)
|
$ 4
|
$ 4
|
|
|
|
|
Common stock and paid-in surplus (24 million shares)
|
24
|
24
|
|
|
|
|
Net plant and equipment
|
$ 160
|
$ 172
|
Retained earnings
|
265
|
104
|
|
Other long-term assets
|
25
|
24
|
|
|
|
|
Total
|
$ 185
|
$ 196
|
Total
|
$ 293
|
$ 132
|
|
Total assets
|
$ 500
|
$ 400
|
Total liabilities and equity
|
$ 500
|
$ 400
|
LAKE OF EGYPT MARINA, INC.
Income Statement for Years Ending December 31, 2015 and 2014
(in millions of dollars)
|
|
2015
|
2014
|
|
Net sales (all credit)
|
$ 600
|
$ 400
|
|
Less: Cost of goods sold
|
216
|
120
|
|
Gross profits
|
$ 384
|
$ 280
|
|
Less: Other operating expenses
|
36
|
24
|
|
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
|
$ 348
|
$ 256
|
|
Less: Depredation
|
30
|
24
|
|
Earnings before interest and taxes (EBIT)
|
$ 318
|
$ 232
|
|
Less: Interest
|
48
|
32
|
|
Earnings before taxes (EBT)
|
$ 270
|
$ 200
|
|
Less: Taxes
|
81
|
60
|
|
Net income
|
$ 189
|
$ 140
|
|
Less: Preferred stock dividends
|
|
|
|
$ 4
|
$ 4
|
|
Net income available to common stockholders
|
$ 185
|
$ 136
|
|
Less: Common stock dividends
|
24
|
24
|
|
Addition to retained earnings
|
$ 161
|
$ 112
|
|
Per (common) share data:
|
|
|
|
Earnings per share (EPS)
|
$ 7.710
|
$ 5.670
|
|
Dividends per share (DPS)
|
$ 1.000
|
$ 1.000
|
|
Book value per share (BVPS)
|
$ 12.040
|
$ 5.330
|
|
Market value (price) per share (MVPS)
|
$ 15.550
|
$ 13.350
|
Construct the DuPont ROA and ROE breakdowns for Lake of Egypt Marina, Inc. (Do not round intermediate calculations. Round your answers to 2 decimal places.)