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FIN 370 Week 3 My Finance Lab




Question;FIN 370 Week 3 My Finance;Lab;1.(Related to Checkpoint 4.2 on page;86) (Capital structure analysis) The liabilities and;owners? equity for Campbell Industries is found below;Accounts payable $;453,000;Notes payable 250,000;Current liabilities $;703,000;Long-term debt $1,263,000;Common equity $5,067,000;Total liabilities and equity $7,033,000;a. What percentage of the firm?s assets does the firm finance using debt;(liabilities)?;2. If Campbell was to purchase a;new warehouse for $1.1 million and finance it entirely with long term debt;what would be the firm?s new debt ratio?;2.The following table;contains current asset and current liability balances for Deere and Company;(DE);QQ ($ thousands) 2008 2007 2006;Current assets;Cash and cash equivalents 2211400 2278600;1687500;Short-term investments 0 1623300;0;Net receivables 3944200 3680900 3508100;Inventory 3041800 2337300 1957300;Total current assets 9197400 9920100 7152900;Current liabilities;Accounts payable 6562800 3186100 4666300;Short/current long-term debt;8520500 9969400 8121200;Other current liabilities 0 2766000;0;Total current liabilities 15083300 15921500 12787500;Measure the liquidity of Deere;Co. for each year using the company?s net working capital and current;ratio. Is the trend in Deere?s liquidity improving over this period? Why or why;not?;3. You just received a $4,000 bonus.;a. Calculate the future value of $4,000, given that it will be held in the bank;for9 years;and earn an annual interest rate of 8%.;b. Recalculate part (A) using a compounding period that (1) semiannual and (2);bimonthly;c. Recalculate parts (A) and (B) using an annual interest rate of 16%?;d. Recalculate part (A) using a time horizon of 18 years at an annual interest;rate of 8%?;e. What conclusions can you draw when you compare the answers in parts (c) and;(d) with the answers in parts (a) and (b)?;4.Break even analysis;2. 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?5.Given the info below.;a. calculate the missing info for each project;b. note that projects c and d share the same accounting break even. If the;sales are above the breakeven point, which project would you prefer? Why?;c. calculate the cash break even for each of the projects. What do the;differences in accounting and cash break even tell you about the four projects?;project accounting breakeven point units price per unit variable cost per unit;fixed costs (fill in the blanks on the chart listed).Breakeven point in units -Price per;unit- Variable cost per unit -fixed costs depreciation;Project A 6210-(find price per unit) $56-;$99,000-$26,000;Project B 770- $960- (findvariable cost;per unit)-$499,000-$103,000;Project C 2000- $21- $15 $4,900-(find;depreciation);Project D 2000- $21- $6-(find fixed;cost)-$12,000;6. (Cash;budget) The Sharpe Corporation?s projected sales for the first eight months of;2011;are as follows;January $ 90,600 May $299,000;February 120,700 June 269,300;March 134,900 July 224,400;April 240,000 August149,500;Of Sharpe?s sales;10 percent is for cash, another 60 percent is collected in the month following;sale, and 30 percent is collected in the second month following sale. November;and December sales for 2010 were $220,800 and $174,200, respectively.;Sharpe purchases its raw materials two months in advance of its sales equal to;60 percent of their final sales price. The supplier is paid one month after it;makes delivery. For example, purchases for April sales are made in February and;payment is made in March.;In addition, Sharpe pays $9,000 per month for rent and $20,100 each month for;other expenditures.;Tax prepayments of;$21,800 are made each quarter, beginning in March.;The company?s cash balance at December 31, 2010, was $21,100, a minimum balance;of $15,000 must be maintained at all times. Assume that any short-term;financing needed to maintain the cash balance is paid off in the month;following the month of financing if sufficient funds are available.;Interest on;short-term loans (11 percent) is paid monthly. Borrowing to meet estimated;monthly cash needs takes place at the beginning of the month. Thus, if in the;month of April the firm expects to have a need for an additional $56,110, these;funds would be borrowed at the beginning of April;with interest of $514 (11% ? 1/12 ? $56,110) owed for April and paid at the;beginning of May.;a. Prepare a cash budget for Sharpe covering the first;seven months of 2011.(nov sales = $220,800, dec sales = $174,200, jan sales =;$90,600;b. Sharpe has $200,900 in notes payable due in July that must be repaid or;renegotiated for an extension. Will the firm have sufficient cash to repay the;notes?


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