ACC351A_midterm_with_solutions_rev - ACC351A MidTerm...

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ACC351A MidTerm Refer to the Kellogg’s annual report, attached.  Your calculations should be based on the  2006 figures.  You, with your brand new Masters degree were hired by Kellogg to perform interesting  financial analysis.   The CFO asks you to compute the following: 1. 10%  What is the amount of the total outstanding obligations and commitments of  Kellogg in 2006? On balance sheet $8,645  Off balance sheet    575 Total                     $9,220 2. 10%  What is Kellogg’s profit margin (return on sales), return on equity and long  term debt to total asset ratios? Net Earnings/Net Sales = 1,004.1/10,906.7=9.2% ROE = Net Earnings/Average Equity = 1,004.1/(2,069+2,283.7)/2 = 46.1% LTD/Total Assets = 3,053/10,714 = 28.4% 3. 20%  What is Kellogg’s WACC assuming the beta is 1.2? Rf+B(Rm-RF) = Ke 5% + 1.2(11% - 5%) = 12.2% ACC351 Midterm Page 1 of 5 Neyland
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