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Ch03 Computron mini case JPM solution - 1 2 3 4 5 6 7 8 9 A...

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HANDOUT1/27/2014(Revised)Chapter 3 Mini CaseInput Data:201220132014Year-end common stock price$8.50$6.00$12.17Year-end shares outstanding100,000100,000250,000Tax rate40%40%40%Lease payments$40,000$40,000$40,000Balance SheetsAssets201220132014Cash and equivalents$9,000$7,282$14,000Short-term investments$48,600$20,000$71,632Accounts receivable$351,200$632,160$878,000Inventories$715,200$1,287,360$1,716,480Total current assets$1,124,000$1,946,802$2,680,112Gross Fixed Assets$491,000$1,202,950$1,220,000Less Accumulated Dep.$146,200$263,160$383,160Net Fixed Assets$344,800$939,790$836,840Total Assets$1,468,800$2,886,592$3,516,952Liabilities and equityAccounts payable$145,600$324,000$359,800Notes payable$200,000$720,000$300,000Accruals$136,000$284,960$380,000Total current liabilities$481,600$1,328,960$1,039,800Long-term bonds$323,432$1,000,000$500,000Total liabilities$805,032$2,328,960$1,539,800Common stock (100,000 shares)$460,000$460,000$1,680,936Retained earnings$203,768$97,632$296,216Total common equity$663,768$557,632$1,977,152Total liabilities and equity$1,468,800$2,886,592$3,516,952Income Statements201220132014Net sales$3,432,000$5,834,400$7,035,600Costs of Goods Sold Except Depr.$2,864,000$4,980,000$5,800,000Depreciation and amortization$18,900$116,960$120,000Other Expenses$340,000$720,000$612,960Total Operating Cost$3,222,900$5,816,960$6,532,960Earnings before interest and taxes (EBIT)$209,100$17,440$502,640Less interest$62,500$176,000$80,000Pre-tax earnings$146,600($158,560)$422,640Taxes (40%)$58,640($63,424)$169,056The first part of the case, presented in Chapter 3, discussed the situation of Computron Industries after an expansionprogram. A large loss occurred in 2013, rather than the expected profit. As a result, its managers, directors, and investorsare concerned about the firm’s survival.Jenny Cochran was brought in as assistant to Gary Meissner, Computron’s chairman, who had the task of getting thecompany back into a sound financial position. Computron’s 2012 and 2013 balance sheets and income statements, togetherwith projections for 2014, are shown in the following tables. The tables also show the 2012 and 2013 financial ratios, alongwith industry average data. The 2014 projected financial statement data represent Cochran’s and Meissner’s best guess for2014 results, assuming that some new financing is arranged to get the company “over the hump.”ABCDEFGHI12345678910111213141516171819202122232425

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Term
Spring
Professor
Murtagh
Tags
Balance Sheet, Financial Ratio, net fixed assets, Total Current Assets

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