公司理财课后小案例答案

《公司理财课后小案例答案》由会员分享，可在线阅读，更多相关《公司理财课后小案例答案（95页珍藏版）》请在装配图网上搜索。

1、Case SolutionsCorporate FinanceRoss, Westerfield, and Jaffe9th editionCHAPTER 2CASH FLOWS AT WARF COMPUTERSThe operating cash flow for the company is: (NOTE: All numbers are in thousands of dollars)OCF = EBIT + Depreciation Current taxesOCF = $1,332 + 159 386 OCF = $1,105To calculate the cash flow f

2、rom assets, we need to find the capital spending and change in net working capital. The capital spending for the year was:Capital spendingEnding net fixed assets$2,280 Beginning net fixed assets1,792+ Depreciation 159 Net capital spending$ 647And the change in net working capital was:Change in net w

3、orking capitalEnding NWC$728 Beginning NWC 586 Change in NWC$142So, the cash flow from assets was:Cash flow from assetsOperating cash flow$1,105 Net capital spending647 Change in NWC 142 Cash flow from assets$316The cash flow to creditors was:Cash flow to creditorsInterest paid $95 Net New Borrowing

4、 20 Cash flow to Creditors $75The cash flow to stockholders was:Cash flow to stockholdersDividends paid $212 Net new equity raised 29 Cash flow to Stockholders $241The accounting cash flow statement of cash flows for the year was:Statement of Cash FlowsOperationsNet income$742Depreciation159Deferred

5、 taxes109Changes in assets and liabilities Accounts receivable(31) Inventories14 Accounts payable17 Accrued expenses(99) Other(9)Total cash flow from operations$902Investing activities Acquisition of fixed assets$(786) Sale of fixed assets139Total cash flow from investing activities$(547)Financing a

6、ctivities Retirement of debt $(98) Proceeds of long-term debt118 Notes payable5 Dividends(212) Repurchase of stock(40) Proceeds from new stock issues11Total cash flow from financing activities$(216)Change in cash (on balance sheet)$39Answers to questions1.The firm had positive earnings in an account

7、ing sense (NI 0) and had positive cash flow from operations and a positive cash flow from assets. The firm invested $142 in new net working capital and $647 in new fixed assets. The firm was able to return $241 to its stockholders and $75 to creditors.2. The financial cash flows present a more accur

8、ate picture of the company since it accurately reflects interest cash flows as a financing decision rather than an operating decision.3.The expansion plans look like they are probably a good idea. The company was able to return a significant amount of cash to its shareholders during the year, but a

9、better use of these cash flows may have been to retain them for the expansion. This decision will be discussed in more detail later in the book.95CHAPTER 3RATIOS AND FINANCIAL PLANNING AT EAST COAST YACHTS1.The calculations for the ratios listed are:Current ratio = $14,651,000 / $19,539,000 Current

10、ratio = 0.75 timesQuick ratio = ($14,651,000 6,136,000) / $19,539,000 Quick ratio = 0.44 timesTotal asset turnover = $167,310,000 / $108,615,000 Total asset turnover = 1.54 timesInventory turnover = $117,910,000 / $6,136,000 Inventory turnover = 19.22 timesReceivables turnover = $167,310,000 / $5,47

11、3,000 Receivables turnover = 30.57 timesTotal debt ratio = ($108,615,000 55,341,000) / $108,615,000 Total debt ratio = 0.49 timesDebt-equity ratio = ($19,539,000 + 33,735,000) / $55,341,000 Debt-equity ratio = 0.96 timesEquity multiplier = $108,615,000 / $55,341,000 Equity multiplier = 1.96 timesInt

12、erest coverage = $23,946,000 / $3,009,000 Interest coverage = 7.96 timesProfit margin = $12,562,200 / $167,310,000 Profit margin = 7.51%Return on assets = $12,562,200 / $108,615,000 Return on assets = 11.57%Return on equity = $12,562,000 / $55,341,000 Return on equity = 22.70% 2.Regarding the liquid

13、ity ratios, East Coast Yachts current ratio is below the median industry ratio. This implies the company has less liquidity than the industry in general. However, the current ratio is above the lower quartile, so there are companies in the industry with lower liquidity than East Coast Yachts. The co

14、mpany may have more predictable cash flows, or more access to short-term borrowing. The turnover ratios are all higher than the industry median; in fact, all three turnover ratios are above the upper quartile. This may mean that East Coast Yachts is more efficient than the industry in using its asse

15、ts to generate sales.The financial leverage ratios are all below the industry median, but above the lower quartile. East Coast Yachts generally has less debt than comparable companies, but is still within the normal range.The profit margin for the company is about the same as the industry median, th

16、e ROA is slightly higher than the industry median, and the ROE is well above the industry median. East Coast Yachts seems to be performing well in the profitability area.Overall, East Coast Yachts performance seems good, although the liquidity ratios indicate that a closer look may be needed in this

17、 area. Below is a list of possible reasons it may be good or bad that each ratio is higher or lower than the industry. Note that the list is not exhaustive, but merely one possible explanation for each ratio.RatioGoodBadCurrent ratioBetter at managing current accounts.May be having liquidity problem

18、s.Quick ratioBetter at managing current accounts.May be having liquidity problems.Total asset turnoverBetter at utilizing assets.Assets may be older and depreciated, requiring extensive investment soon.Inventory turnoverBetter at inventory management, possibly due to better procedures.Could be exper

19、iencing inventory shortages.Receivables turnoverBetter at collecting receivables.May have credit terms that are too strict. Decreasing receivables turnover may increase sales.Total debt ratioLess debt than industry median means the company is less likely to experience credit problems.Increasing the

20、amount of debt can increase shareholder returns. Especially notice that it will increase ROE.Debt-equity ratioLess debt than industry median means the company is less likely to experience credit problems.Increasing the amount of debt can increase shareholder returns. Especially notice that it will i

21、ncrease ROE.Equity multiplierLess debt than industry median means the company is less likely to experience credit problems.Increasing the amount of debt can increase shareholder returns. Especially notice that it will increase ROE.Interest coverageLess debt than industry median means the company is

22、less likely to experience credit problems.Increasing the amount of debt can increase shareholder returns. Especially notice that it will increase ROE.Profit marginThe PM is slightly above the industry median, so it is performing better than many peers.May be able to better control costs.ROACompany i

23、s performing above many of its peers.Assets may be old and depreciated relative to industry.ROECompany is performing above many of its peers.Profit margin and EM could still be increased, which would further increase ROE.If you created an Inventory to Current liabilities ratio, East Coast Yachts wou

24、ld have a ratio that is lower than the industry median. The current ratio is below the industry median, while the quick ratio is above the industry median. This implies that East Coast Yachts has less inventory to current liabilities than the industry median. Because the cash ratio is lower than the

25、 industry median, East Coast Yachts has less inventory than the industry median, but more accounts receivable.3.To calculate the internal growth rate, we first need to find the ROE and the retention ratio, so:ROE = NI / TE ROE = $12,562,200 / $55,341,000 ROE = .2270 or 22.70%b = Addition to RE / NI

26、b = $5,024,800 / $12,562,200 b = 0.40 or 40%So, the sustainable growth rate is:Sustainable growth rate = (ROE b) / 1 (ROE b)Sustainable growth rate = 0.2270(.40) / 1 0.2270(.40) Sustainable growth rate = .0999 or 9.99%The sustainable growth rate is the growth rate the company can achieve with no ext

27、ernal financing while maintaining a constant debt-equity ratio.At the sustainable growth rate, the pro forma statements next year will be:Income statementSales$184,018,615COGS129,685,224Other expenses21,990,725Depreciation5,460,000EBIT$26,882,666Interest3,009,000Taxable income$23,873,666Taxes (40%)9

28、,549,466Net income$14,324,199Dividends$8,594,520Add to RE5,729,680Balance sheetAssetsLiabilities & EquityCurrent AssetsCurrent Liabilities Cash$3,345,793 Accounts Payable$7,106,236 Accounts rec.6,019,568 Notes Payable14,384,050 Inventory6,748,779 Total CL$21,490,286 Total CA$16,114,140Long-term debt

29、$33,735,000Shareholder Equity Common stock$5,200,000Fixed assets Retained earnings55,870,680 Net PP&E$103,347,828 Total Equity$61,070,680Total Assets$119,461,968Total L&E$116,295,966So, the EFN is:EFN = Total assets Total liabilities and equityEFN = $119,461,968 116,295,966 EFN = $3,166,002The ratio

30、s with these pro forma statements are:Current ratio = $16,114,140 / $21,490,286 Current ratio = 0.75 timesQuick ratio = ($16,114,140 6,748,779) / $21,490,286 Quick ratio = 0.44 timesTotal asset turnover = $184,018,615 / $119,461,968 Total asset turnover = 1.54 timesInventory turnover = $129,685,224

31、/ $6,748,779Inventory turnover = 19.22 timesReceivables turnover = $184,018,615 / $6,019,568Receivables turnover = 30.57 timesTotal debt ratio = ($116,295,966 61,070,680) / $116,295,966 Total debt ratio = 0.49 timesDebt-equity ratio = ($21,490,286 + 33,735,000) / $61,070,680 Debt-equity ratio = 0.90

32、 timesEquity multiplier = $119,460,968 / $61,070,680 Equity multiplier = 1.96 timesInterest coverage = $26,882,666 / $3,009,000 Interest coverage = 8.93 timesProfit margin = $14,324,199 / $184,018,615 Profit margin = 7.78%Return on assets = $14,324,199 / $119,461,968 Return on assets = 11.99%Return

33、on equity = $14,324,199 / $61,070,680 Return on equity = 23.45% The only ratios that changed are the debt ratio, the interest coverage ratio, profit margin, return on assets, and return on equity. The debt ratio changes because long-term debt is assumed to remain fixed in the pro forma statements. T

34、he other ratios change slightly because interest and depreciation are also assumed to remain constant as well.4.Pro forma financial statements for next year at a 20 percent growth rate are:Income statementSales$200,772,000COGS141,492,000Other expenses23,992,800Depreciation5,460,000EBIT$29,827,200Int

35、erest3,009,000Taxable income$26,818,200Taxes (40%)10,727,280Net income$16,090,920Dividends$9,654,552Add to RE6,436,368Balance sheetAssetsLiabilities & EquityCurrent AssetsCurrent Liabilities Cash$3,650,400 Accounts Payable$7,753,200 Accounts rec.6,567,600 Notes Payable15,693,600 Inventory7,363,200 T

36、otal CL$23,446,800 Total CA$17,581,200Long-term debt$33,735,000Shareholder Equity Common stock$5,200,000Fixed assets Retained earnings56,577,368 Net PP&E$112,756,800 Total Equity$61,777,368Total Assets$130,338,000Total L&E$118,959,168So, the EFN is:EFN = Total assets Total liabilities and equityEFN

37、= $130,338,000 118,959,168 EFN = $8,753,0405.Now we are assuming the company can only build in amounts of $30 million. We will assume that the company will go ahead with the fixed asset acquisition. In this case, the pro forma financial statement calculation will change slightly. Before, we made the

38、 assumption that depreciation increased proportionally with sales, which makes sense if fixed assets increase proportionally with sales. This is not the case now. To estimate the new depreciation charge, we will find the current depreciation as a percentage of fixed assets, then, apply this percenta

39、ge to the new fixed assets. The depreciation as a percentage of assets this year was:Depreciation percentage = $5,460,000 / $93,964,000Depreciation percentage = .0581 or 5.81%The new level of fixed assets with the $30 million purchase will be:New fixed assets = $93,964,000 + 30,000,000 = $123,964,00

40、0So, the pro forma depreciation as a percentage of sales will be:Pro forma depreciation = .0581($123,964,000) Pro forma depreciation = $7,203,221 We will use this amount in the pro form income statement. So, the pro forma income statement will be:Income statementSales$200,772,000COGS141,492,000Other

41、 expenses23,992,800Depreciation7,203,221EBIT$28,083,979Interest3,009,000Taxable income$25,074,979Taxes (40%)10,029,992Net income$15,044,988Dividends$9,026,993Add to RE6,017,995The pro forma balance sheet will remain the same except for the fixed asset and equity accounts. The fixed asset account wil

42、l increase by $30 million, rather than the growth rate of sales. Balance sheetAssetsLiabilities & EquityCurrent AssetsCurrent Liabilities Cash$3,650,400 Accounts Payable$7,753,200 Accounts rec.6,567,600 Notes Payable15,693,600 Inventory7,363,200 Total CL$23,446,800 Total CA$17,581,200Long-term debt$

43、33,735,000Shareholder Equity Common stock$5,200,000Fixed assets Retained earnings56,158,995 Net PP&E$123,964,000 Total Equity$61,358,995Total Assets$141,545,200Total L&E$118,540,795So, the EFN is:EFN = Total assets Total liabilities and equityEFN = $141,545,200 118,540,795 EFN = $23,004,405Since the

44、 fixed assets have increased at a faster percentage than sales, the capacity utilization for next year will decrease.CHAPTER 4THE MBA DECISION1.Age is obviously an important factor. The younger an individual is, the more time there is for the (hopefully) increased salary to offset the cost of the de

45、cision to return to school for an MBA. The cost includes both the explicit costs such as tuition, as well as the opportunity cost of the lost salary.2.Perhaps the most important nonquantifiable factors would be whether or not he is married and if he has any children. With a spouse and/or children, h

46、e may be less inclined to return for an MBA since his family may be less amenable to the time and money constraints imposed by classes. Other factors would include his willingness and desire to pursue an MBA, job satisfaction, and how important the prestige of a job is to him, regardless of the sala

47、ry.3.He has three choices: remain at his current job, pursue a Wilton MBA, or pursue a Mt. Perry MBA. In this analysis, room and board costs are irrelevant since presumably they will be the same whether he attends college or keeps his current job. We need to find the aftertax value of each, so:Remai

48、n at current job:Aftertax salary = $60,000(1 .26) = $44,400His salary will grow at 3 percent per year, so the present value of his aftertax salary is:PV = C 1/(r g) 1/(r g) (1 + g)/(1 + r)t PV = $44,4001/(.065 .03) 1/(.065 .03) (1 + .03)/(1 + .065)40PV = $935,283.49Wilton MBA:Costs:The direct costs

49、will occur today and in one year and include tuition, books and supplies, health insurance, and the room and board increase. So the total direct costs are: PV of direct expenses = ($65,000 + 3,000 + 3,000 + 2,000) + ($65,000 + 3,000 + 3,000 + 2,500) / 1.065 PV of direct expenses = $141,544.60The ind

50、irect costs are the lost salary, so the value of the indirect costs are:PV of indirect costs (lost salary) = $44,400 / (1.065) + $44,400(1 + .03) / (1 + .065)2 PV of indirect costs (lost salary) = $82,010.18The financial benefits are the bonus to be paid in 2 years and the future salary. PV of after

51、tax bonus paid in 2 years = $20,000(1 .31) / 1.0652 = $12,166.90Aftertax salary = $10,000(1 .31) = $75,900His salary will grow at 4 percent per year. We must also remember that he will now only work for 38 years, so the present value of his aftertax salary is:PV = C 1/(r g) 1/(r g) (1 + g)/(1 + r)t

52、PV = $75,9001/(.065 .04) 1/(.065 .04) (1 + .04)/(1 + .065)38PV = $1,804,927.68Since the first salary payment will be received three years from today, so we need to discount this for two years to find the value today, which will be: PV = $1,804,927.68 / 1.0652PV = $1,591,331.25So, the total value of

53、a Wilton MBA is:Value = $141,544.60 82,010.18 + 12,166.90 + 1,591,331.25 = $1,379,943.36Mount Perry MBA:The direct costs will occur today and include tuition, books and supplies, health insurance, and the room and board increase. So the total direct costs are:Total direct costs = $80,000 + 4,500 + 3

54、,000 + 2,000 = $89,500. Note, this is also the PV of the direct costs since they are all paid today.The indirect costs are the lost salary, so the value of the indirect costs are:PV of indirect costs (lost salary) = $44,400 / (1.065) = $41,690.14The financial benefits are the bonus to be paid in 1 y

55、ear and the future salary. PV of aftertax bonus paid in 1 year = $18,000(1 .29) / 1.065 = $12,000His aftertax salary at his new job will be:Aftertax salary = $80,000(1 .29) = $65,320His salary will grow at 3.5 percent per year. We must also remember that he will now only work for 39 years, so the pr

56、esent value of his aftertax salary is:PV = C 1/(r g) 1/(r g) (1 + g)/(1 + r)t PV = $65,3201/(.065 .035) 1/(.065 .035) (1 + .035)/(1 + .065)35PV = $1,462,896.46Since the first salary payment will be received two years from today, so we need to discount this for one year to find the value today, which

57、 will be: PV = $1,462,896.46 / 1.065PV = $1,373,611.70So, the total value of a Mount Perry MBA is:Value = $89,500 41,690.14 + 12,000 + 1,373,611.70 = $1,254,421.564.He is somewhat correct. Calculating the future value of each decision will result in the option with the highest present value having the highest future value. Thus, a future value analysis will result in the same decision. However, his state