SOUTHERN NEW HAMPSHIRE UNIVERSITY School of Business Summer Term, 2010SNHU Online FIN500: Case #2 Assignment INSTRUCTOR: Dr. Gary P. Tripp
INSTRUCTIONS FOR CASE (PROBLEM SET) #2: Your second case assignment (graded problem set) deals with the topics surro
Southern New Hampshire University School of Business Summer Term, 2010SNHU Online FIN500: Case #1 Assignment INSTRUCTOR: Dr. Gary P. Tripp
Instructions: Your first case assignment is in fact a graded problem set dealing with the topics of time value of mo
Problem 14-2
Given
ST Debt
LT Debt
Common Equity
Total
Book values
$1,299,000
11,936,000
9,039,000
$22,274,000
Solution
As market values have to be considered for calculating weights
Weight of Debt
Weight of Equity
Problem 14-2
Given
Market Values
$1,299,
Case 2 #3
Bond
Face Value
Coupon
Current Market value
mature
Marginal tax rate
$
$
1,000.00
11.60%
1,122.00
10
34.00%
Yield to maturity
9.64%
After tax Kd
YTM*(1-t)
Kd
6.37%
C
New Common stock
Last year dividend
Par value
Dididend growth rate
Current par
Problem 15-13
Step 1
Instructions to use the Solutio
Enter the given values from the textbook in the below yellow colored cells
Given
Equity
Debt
Price of each share
Income tax
Interest rate
Solution
a
Number of shares issues in plan B
Number of shares is
Operating Profit Margin
Sales
Total Assets
11.7%
$ 10.7
$
4.6
a - Total Asset Turnover Ratio
2.3 (sales/TA)
b - The CEO set a goal of TATO of 3.4. How much must the firm sales increase, other things being the same, for the goal to
TATO=Sales/TA. If TATO=3
Initial pro forma income statement
% of sales
Sales
Variable Costs
Revenue before fixed costs
Fixed costs
EBIT
Interest expense
Earnings before taxes
Taxes (50%)
Net income
$
$
$
$
$
45,784,000
(22,735,000)
23,049,000
(9,215,000)
13,834,000
(1,276,000)
12
Problem 10-9
a
Given
Retention per share
ROE
Earnings per share
$12.00
21.00%
$20.00
Retention percentage
Growth rate
Solution
60.00%
12.60%
b
Given
growth rate
Dividend
Rate of return
12.60%
$8.00
13.00%
Solution
$2,252.00
Value of common stock
c
Given
R
Problem 14-6
a
Given
Yield Rate
Tax rate
Solution
Cost of debt capital
b
Given
Last year dividend
Market price of stock
Dividend growth rate
Solution
Cost of capital Equity Capital
c
Given
Face value
Market Value
Number of years
Coupon rate
Tax rate
Solut
Problem 17-6
Given
Sales for the Year Ended on 12/31/13
Anticipated Sales
a
Balance Sheet
Current Assets
Net Fixed Assets
Total Assets
Accounts Payable
Notes Payable
Bonds Payable
Common Equity
Total Liabilities and Owner's Equity
b
Solution
Retained Earn
Problem 17-4
Given
Total asset turnover
Average collection period (assume a 365-day year)
Fixed asset turnover
Inventory turnover (based on cost of goods sold)
Current ratio
Sales (all on credit)
Cost of goods sold
Debt ratio
Solution
Total Assets= Sales/
Problem 10-13
Given
P/E ratio of similar stock
ROE
Retention ratio
Expected earnings at end of year
Required rate of return
a
Solution
Growth rate
b
Solution
P/E ratio (for comparable firm)
c
Solution
Stock price
d
Solution
Value of common stock
e
Given
P
Problem 14-6
a
Given
Yield Rate
Tax rate
Solution
Cost of debt capital
b
Given
Last year dividend
Market price of stock
Dividend growth rate
Solution
Cost of capital Equity Capital
c
Given
Face value
Market Value
Number of years
Coupon rate
Tax rate
Solut
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