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FIN 370 Week 2 Lab




Question;FIN 370 Week 2 Lab;Problem 1(Preparing;common-size financial statements);The;balance sheet and income statement for Carver Enterprises, Inc. are found here;Problem 2(Analyzing;common-size financial statements);Use;the common size financial statements found here to respond to your boss;request that you write up your assessment of the firm's financial condition.;Specifically, write up a brief narrative that responds to the following;questions: How much cash does Carver have on hand relative to its total assets?;a.;What proportion of Carver's assets has the firm financed using short-term debt?;Long-tem1 debt?;b.;What percent of Carver's revenues does the firm have left over after paying all;of its expenses (including taxes)?;c.;Describe the relative importance of Carver's major expense categories including;cost of goods sold, operating expenses, and interest expenses.;Problem 3(Using;common-size financial statements);The;S&H Construction Company expects to have total sales next year totaling $14,500,000.;ln addition, the firm pays taxes at 35 percent and will owe $286,000 in;interest expense. Based on last year's operations the firm's management;predicts that its cost of goods sold will be 60 percent of sales and operating;expenses will total 26 percent. What is your estimate of the firm's net income;(after taxes) for the coming year?;Problem 4(Liquidity;analysis);Airspot;Motors, Inc. has $2,523,000 in current assets and $870,000 in current;liabilities. The company's managers want to increase the firm's inventory;which will be financed using short-term debt. How much can the firm increase;its inventory without its current ratio falling below 2.1 (assuming all other;current assets and current liabilities remain constant);Problem 5(Future;value);To;what amount will $5,200 invested for 10 years at 9 percent compounded annually;accumulate?;Problem 6(Future;value);Leslie;Mosallam, who recently sold her Porsche, placed S 10,600 in a savings account;paying annual compound interest of 5 percent.;a.;Calculate the amount of money that will accumulate if Leslie leaves the money;in the bank for 3, 7, and 17 year(s).;b.;Suppose Leslie moves her money into an account that pays 7 percent or one that;pays 9 percent. Rework part (a) using 7 percent and 9 percent.;c.;What conclusions can you draw about the relationship between interest rates;time, and future sums from the calculations you just did?;Problem 7(Related;to the Business of Life: Saving for Your First House) (Future value);You;are hoping to buy a house in the future and recently received an inheritance of;$20,000. You intend to use your inheritance as a down payment on your house.;a.;If you put your inheritance in an account that earns 9 percent interest;compounded annually, how many years will it be before your inheritance grows to;$30,000?;b.;If you let your money grow for 9.75 years at 9 percent, how much will you have?;c.;How long w ll it take your money to grow to $30,000 if you move it into an;account that pays 3 percent compounded annually?;How;long will it take your money to grow to $30,000 if you move it into an account;that pays I I percent?;d.;What does all this tell you about the relationship among interest rates, time;and future sums?;Problem 8(Future;value);Bob;Terwilliger received $13,881 tor his services as financial consultant to the;mayor's office of his hometown of Springfield. Bob says that his consulting;work was his civic duty and that he should not receive any compensation. So, he;has invested his paycheck into an account paying 3.59 percent annual interest;and left the account in his will to the city of Springfield on the condition;that the city could not collect any money from the account for 160 years. How;much money will the city receive in 160 years from Bob's generosity?;Problem 9(Calculating;expected revenues);The;owner of the Crusik Distribution Company is evaluating the expected annual;sales tor a new line of facial care products and estimates that there is a 53;percent chance that the product line will be extremely successful, in which;case it will generate sales next year of 5.5 million. However, since the new;product line has a unique appeal that will require substantial advertising by;its manufacturer to gain consumer acceptance, there is a 47 percent chance that;revenues for next year will be a modest 1.3 million. What is the expected level;of revenues for the new product line?;Problem 10(Forecasting;cash flows using the expected value);Peterson;Trucking is contemplating the acquisition of Armour Transport, a competing;trucking firm, and estimates that during the next year the cash flows from;the Armour Transport acquisition will;vary depending upon the state of the local economy;a.;Calculate the expected cash flow for next year using the estimates provided;above.;b.;Assume the probability of a recession increases to 43 percent, the normal;scenario probability remains at 51 percent, and the expansion probability drops;to only 6 percent. What is your estimate of the expected cash flow for next;year under these circumstances?;c.;Your analysis of the acquisition suggests that tor the investment to have at;least a zero NPV. it must produce an annual expected cash flow of 90,41 0 per;year over the next five years. Assuming that the cash flow you estimated in;part a is the expected cash flow for years one through five, what would you;like to know about the project cash flows to make you more comfortable with the;idea that you can indeed generate the requisite 90,410 per year cash flow? (No;computations required.);Problem 11(Financial;Forecasting);Zapatera;Enterprises is evaluating its financing requirements for the coming year. The;firm has only been in business for one year, but its CFO predicts that the;firm's operating expenses, current assets, net fixed assets, and current;liabilities will remain at their current proportion of sales. Last year;Zapatera had $12.27 million in sales with net income of $1.24 million. The firm;anticipates that next year's sales will reach $14.56 million with net income rising;to $2.13 million. Given its present high rate of growth, the firm retains all;of its earnings to help defray the cost of new investments.;The;firm's balance sheet for the year just ended is as follows;Estimate;Zapatera's total financing requirements (total assets) and its net funding;requirements (discretionary financing needed) for 2014. Note: Use the;percentage of sales given in Zapatera Enterprises' balance sheet for 2013.;Problem 12(Related;to Checkpoint 5.6);Lance;Murdock purchased a wooden statue of a Conquistador for $7,600 to put in his;home office 7 years ago. Lance has recently married, and his home office is;being converted into a sewing room. His new wife, who has far better taste than;Lance, thinks the Conquistador is hideous and must go immediately. Lance;decided to sell it on e-Bay and only received $5,200 for it, and so he took a;loss on the investment. What was his rate of return, that is, the value of i?;Problem;13-4 (Related to Checkpoint 13.3) (Forecasting revenues using scenario analysis);Floating Homes, Inc. is a manufacturer of luxury pontoon and house boats that;sell for $40,000 to $100,000. To estimate its revenues for the following year;Floating Homes divides its boat sales into three categories based on selling;price (high, medium, and low) and estimates the number of units it expects to;sell under three different economic scenarios. These scenarios include a;recession (Scenario Q, a continuation of current conditions in which the;economy is level (Scenario IQ, and a strong economy (Scenario IIQ. These;estimates are given here: Using these estimates, calculate the expected revenue;for Floating Homes, Inc. for the following year.;Problem 14(Break-even;analysis);Farrington;Enterprises owns a number of sporting goods businesses and is currently;analyzing a new T-shirt printing business. Specifically, the company is;evaluating the feasibility of this business based on its estimates of unit;sales, the price per unit, variable cost per unit and fixed costs. The company's;initial estimates of annual sales and other critical variables are shown here;Problem 15;The;Marvel Mfg. Company is considering whether or not to construct a new robotic;production facility. The cost of it is $582,000 and it?s expected to have a six;year life with annual depreciation expense of $97,000 and no salvage value.;Annual Sales from the new facility is expected 2,010 units with a price of $930;per unit. Variable production costs are $570 per unit while fixed cash expenses;are $75,000 per year;a.;find the accounting and the cash break-even units of production. (round to;nearest interger);b.;will the plant make a profit based on its current expected level of operations?;c.;will the plant contribute cash flow to the firm at the expected level of operations?;Problem 16(Review;of financial statements);A;scrambled list of accounts from the income statement and balance sheet of;Belmond, Inc. is found here;a..;How much is the firm's net working capital?;b.;Complete an income statement and a balance sheet for Behnond..;c.;If you were asked to respond to parts (a) and {II) as part of a training;exercise, what could you tell your boss about the company's financial condition;based on your answers?;Problem 17(Corporate;income tax);Meyer;Inc. bas taxable income (earnings before taxes) of $300,000. Calculate Meyers;federal income tax liability using the tax table shown in the popup. What are;the firm's and marginal tax rates?;Problem 18(Analyzing;the quality of firm earnings);Kabutell;Inc. had net income of $750,000, cash flow from financing activities of;$50,000, depreciation expenses of $50,000, and cash flow from operating;activities of $575,000.


Paper#47583 | Written in 18-Jul-2015

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