BBA 3310 Unit VI AssignmentInstructions Enter all answers.docx

BBA 3310 Unit VI Assignment
Instructions: Enter all answers directly in this worksheet. When
finished select Save As, and save this document using your last
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Question 1: (10 points). (Bond valuation) Calculate the value of
a bond that matures in 12 years and has $1,000 par value. The
annual coupon interest rate is 9 percent and the market's
required yield to maturity on a comparable-risk bond is 12
percent. Round to the nearest cent.
The value of the bond is
$814.17
Question 2: (10 points). (Bond valuation) Enterprise, Inc. bonds
have an annual coupon rate of 11 percent. The interest is paid
semiannually and the bonds mature in 9 years. Their par value
is $1,000. If the market's required yield to maturity on a
comparable-risk bond is 14 percent, what is the value of the
bond? What is its value if the interest is paid annually and
semiannually? (Round to the nearest cent.)
a. The value of the Enterprise bonds if the interest is paid
semiannually is
$ 849.11
b. The value of the Enterprise bonds if the interest is paid
annually is
$ 851.61

Question 3: (10 points). (Yield to maturity) The market price is
$750 for a 20-year bond ($1,000 par value) that pays 9 percent
annual interest, but makes interest payments on a semiannual
basis (4.5 percent semiannually). What is the bond's yield to
maturity? (Round to two decimal places.)
The bond's yield to maturity is
6.20
%
Question 4: (10 points). (Yield to maturity) A bond's market
price is $950. It has a $1,000 par value, will mature in 14 years,
and has a coupon interest rate of 8 percent annual interest, but
makes its interest payments semiannually. What is the bond's
yield to maturity? What happens to the bond's yield to maturity
if the bond matures in 28 years? What if it matures in 7 years?
(Round to two decimal places.)
The bond's yield to maturity if it matures in 14 years is
4.31
%
4.23
%
4.49
%
Question 5: (15 points). (Bond valuation relationships) Arizona
Public Utilities issued a bond that pays $70 in interest, with a
$1,000 par value and matures in 25 years. The markers required
yield to maturity on a comparable-risk bond is 8 percent.
(Round to the nearest cent.) For questions with two answer
options (e.g. increase/decrease) choose the best answer and
write it in the answer block.

Question
Answer
a. What is the value of the bond if the markers required yield to
maturity on a comparable-risk bond is 8 percent?
$ 893.252
b. What is the value of the bond if the markers required yield to
maturity on a comparable-risk bond increases to 11 percent?
$ 663.13
c. What is the value of the bond if the market's required yield to
maturity on a comparable-risk bond decreases to 7 percent?
$1000
d. The change in the value of a bond caused by changing
interest rates is called interest-rate risk. Based on the answer: in
parts b and c, a decrease in interest rates (the yield to maturity)
will cause the value of a bond to (increase/decrease):
Increase
By contrast in interest rates will cause the value to
(increase/decrease):
decrease
Also, based on the answers in part b, if the yield to maturity
(current interest rate) equals the coupon interest rate, the bond
will sell at (par/face value):
exceeds the bond's coupon rate, the bond will sell at a
(discount/premium):
and is less than the bond's coupon rate, the bond will sell at a
(discount/premium):

e. Assume the bond matures in 5 years instead of 25 years, what
is the value of the bond if the yield to maturity on a
comparable-risk bond is 8 percent? $ 960.07 Assume the bond
matures in 5 years instead of 25 years, what is the value of the
bond if the yield to maturity on a comparable-risk bond is 11
percent?
$ 921.74 for 8%
$ 818.14 for 11%
f. Assume the bond matures in 5 years instead of 25 years, what
is the value of the bond if the yield to maturity on a
comparable-risk bond is 7 percent?
$ 960.07
g. From the findings in part e, we can conclude that a
bondholder owning a long-term bond is exposed to (more/less)
interest-rate risk than one owning a short-term bond.
more
Question 6: (5 points). (Measuring growth) If Pepperdine, Inc.'s
return on equity is 14 percent and the management plans to
retain 55 percent of earnings for investment purposes, what will
be the firm's growth rate? (Round to two decimal places.)
The firm's growth rate will be
25.45
%
Question 7: (10 points). (Common stock valuation) The common

stock of NCP paid $1.29 in dividends last year. Dividends are
expected to grow at an annual rate of 6.00 percent for an
indefinite number of years. (Round to the nearest cent.)
a. If your required rate of return is 8.70 percent, the value of the
stock for you is:
$50.64
b. You (should/should not) make the investment if your
expected value of the stock is (greater/less) than the current
market price because the stock would be undervalued.
Should not
less
Question 8: (10 points). (Measuring growth) Given that a firm's
return on equity is 22 percent and management plans to retain
37 percent of earnings for investment purposes, what will be the
firm's growth rate? If the firm decides to increase its retention
rate, what will happen to the value of its common stock? (Round
to two decimal places.)
a. The firm's growth rate will be:
59.46%
b. If the firm decides to increase its retention ratio, what will
happen to the value of its common stock? An increase in the
retention rate will (increase/decrease) the rate of growth in
dividends, which in turn will (increase/decrease) the value of
the common stock.
Increase
decrease
Question 9: (10 points). (Relative valuation of common stock)
Using the P/E ratio approach to valuation, calculate the value of
a share of stock under the following conditions:
· the investor's required rate of return is 13 percent,
· the expected level of earnings at the end of this year (E1) is

$8,
· the firm follows a policy of retaining 40 percent of its
earnings,
· the return on equity (ROE) is 15 percent, and
· similar shares of stock sell at multiples of 8.571 times
earnings per share.
Now show that you get the same answer using the discounted
dividend model. (Round to the nearest cent.)
a. The stock price using the P/E ratio valuation method is:
$460
b. The stock price using the dividend discount model is:
$460
Question 10: (10 points) (Preferred stock valuation) Calculate
the value of a preferred stock that pays a dividend of $8.00 per
share when the market's required yield on similar shares is 13
percent. (Round to the nearest cent.)
a. The value of the preferred stock is
$61.54
Per share
Sheet1Google stockPRICEAmount of gainRate of
returnDec,5,2007$698.51($396.52)-
56.77%Dec,5,2008$301.99Plaxos stocksTotal return% rate of
returninitial share price9.453.6438.52%ending share
price11.66divdends1.43TimeCaswellAverage rate of
returngeometric mean1$120.00129-0.250.7537-0.220.7846-

0.140.86580.330.67Arithmetic average rate of return-
5.63%4.06Geometric average rate of
return0.3234SYNTAXCommon Stock AProbabilityReturnX-
E[X](X-E[X])^20.210%-
5.8%0.0033640.616%0.2%0.0000040.221%5.2%0.002704Expect
ed returns15.80%variance0.001216standard
deviation0.0348711915Common Stock BProbabilityReturnX-
E[X](X-E[X])^20.1-7%-15.50%2.40%0.45%-
3.50%0.12%0.413%4.50%0.20%0.120%11.50%1.32%Expected
returns8.50%variance0.005025standard deviation0.0708872344
Sheet2
Sheet3
Running Head: FINANCIAL ASSESSMENT
FINANCIAL ASSESSMENT
FINANCIAL ASSESSMENT
Name of student
University
Date of submission
1).Google stock rate of return
Rate of return= (end price-initial price)/initial price
Google stock
PRICE
Amount of gain
Rate of return
Dec,5,2007

$698.51
($396.52)
-56.77%
Dec,5,2008
$301.99
2).Plaxo’s stocks
Rate of return= (end price-initial price + dividends)/initial price
Plaxo’s stocks
Total return
% rate of return
initial share price
9.45
3.64
38.52%
ending share price
11.66
dividends
1.43
3).Caswell Investment
Rate of return= (end price-initial price)/initial price
Time
Caswell
Average rate of return
geometric mean
1
$12
0.00

1
2
9
-0.25
0.75
3
7
-0.22
0.78
4
6
-0.14
0.86
5
8
0.33
0.67
Arithmetic average rate of return
-5.63%
4.06
Geometric average rate of return
32.34%
The geometric mean is the one that best describes the annual
rate of return since the investment returns are not independent
of each other therefore the geometric means gives the most
accurate measurement of the investments annual rate of return.
4).Expected returns and risk analysis
SYNTAX

Common Stock A
Probability
Return
X-E[X]
(X-E[X])^2
0.2
10%
-5.8%
0.003364
0.6
16%
0.2%
4E-06
0.2
21%
5.2%
0.002704
Expected returns
15.80%

variance
0.001216
standard deviation
0.034871192
Common Stock B
Probability
Return
X-E[X]
(X-E[X])^2
0.1
-7%
-15.50%
2.40%
0.4
5%
-3.50%
0.12%
0.4
13%

4.50%
0.20%
0.1
20%
11.50%
1.32%
Expected returns
8.50%
variance
0.005025
standard deviation
0.070887234
Based on risk analysis, common stock A is the better investment
since it has a lower variance and standard deviation of 0.035
compared to that of stock B at 0.070.This implies that there is
less uncertainty associated with returns from stock A which
makes it less risky.
References
Khan, M. Y, and P. K Jain. Financial Management ; Text,
Problems And Cases. 1st ed. New Delhi: Tata McGraw-Hill,
2004. Print.

1
2
BBA 3301 Unit VII Assignment
Question 1: (10 points). (Net present value calculation) Dowling
Sportswear is considering building a new factory to produce
aluminum baseball bats. This project would require an initial
cash outlay of $4,000,000 and would generate annual net cash
inflows of $900,000 per year for 7 years. Calculate the project's
NPV using a discount rate of 5 percent. (Round to the nearest
dollar.)
a. If the discount rate is 5 percent, then the project's NPV is:
$1,150,225
Question 2: (30 points). (Net present value calculation) Big
Steve's, makers of swizzle sticks, is considering the purchase of
a new plastic stamping machine. This investment requires an
initial outlay of $90,000 and will generate net cash inflows of
$19,000 per year for 11 years. To answer Orange item
questions, keep the text that is the best answer.
a. What is the project's NPV using a discount rate of 7 percent?
(Round to the nearest dollar.)

If the discount rate is 7 percent, then the project's NPV is:
$49,042
Should the project be accepted?
The project
should be
accepted because the NPV is
positive
and therefore
adds
value to the firm.
b. What is the project's NPV using a discount rate of 16
percent?
$4,779
Should the project be accepted? Why or why not?
Yes it should be accepted since the present value is positive
c. What is this project's internal rate of return? (Round to two
decimal places.)
This project's internal rate of return is:
18%
If the project's required discount rate is 7%, then the project

should be
accepted because the IRR is
higher than
the required discount rate.
should be
higher than
Question 3: (15 points). (Related to Checkpoint 11.2)
(Equivalent annual cost calculation) Barry Boswell is a
financial analyst for Dossman Metal Works, Inc. and he is
analyzing two alternative configurations for the firm's new
plasma cutter shop. The two alternatives that are denoted A and
B below perform the same task and although they each cost to
purchase and install they offer very different cash flows.
Alternative A has a useful life of 7 years whereas Alternative B
will only last for 3 years. The after-tax cash flows from the two
projects are as follows:
a. Calculate each project's equivalent annual cost (EAC) given a
discount rate of 10 percent. (Round to the nearest cent.)
a. Alternative A's equivalent annual cost (EAC) at a discount
rate of 10% is:
$19,091.51
b. Alternative B's equivalent annual cost (EAC) at a discount
rate of 10% is

$5,038.20
b. Which of the alternatives do you think Barry should select?
Why? (Select the best choice below.)
a. This cannot be determined from the information provided.
b. Alternative B should be selected because its equivalent
annual cost is less per year than the annual equivalent cost for
Alternative A.
c. Alternative A should be selected because its equivalent
Alternative B.
d. Alternative A should be selected because it has the highest
NPV.
Answer: b
Question 4: (10 points). (IRR calculation) What is the internal
rate of return for the following project: An initial outlay of
$9,000 resulting in a single cash inflow of $15,424 in 7 years.
(Round to the nearest whole percent.)
a. The internal rate of return for the project is:
7%
Question 5: (10 points). (IRR calculation) Jella Cosmetics is
considering a project that costs $750,000 and is expected to last
for 9 years and produce future cash flows of $180,000 per year.
If the appropriate discount rate for this project is 17 percent,
what is the project's IRR? (Round to two decimal places.)

a. The project's IRR is:
19%
Question 6: (10 points) (IRR, payback, and calculating a
missing cash flow) Mode Publishing is considering a new
printing facility that will involve a large initial outlay and then
result in a series of positive cash flows for four years. The
estimated cash flows associated with this project are:
If you know that the project has a regular payback of 2.9 years,
what is the project's internal rate of return?
a. The IRR of the project is:
15%
Question 7: (15 points) (Mutually exclusive projects and NPV)
You have been assigned the task of evaluating two mutually
exclusive projects with the following projected cash flows:
If the appropriate discount rate on these projects is 11 percent,
which would be chosen and why? (Round to the nearest cent.)
a. The NPV of Project A is:
$790
b. The NPV of Project B is:
$13,175.48

Which project would be chosen and why? (Select the best
choice below.)
a. Cannor choose without comparing their IRRs.
b. Choose A because its NPV is higher.
c. Choose both because they both have positive NPVs.
d. Choose B because its NPV is higher.
Answer: d
BBA 3301 Unit VII Assignment
Question 1: (10 points). (Net present value calculation) Dowling
Sportswear is considering building a new factory to produce
aluminum baseball bats. This project would require an initial
cash outlay of $4,000,000 and would generate annual net cash
inflows of $900,000 per year for 7 years. Calculate the project's
NPV using a discount rate of 5 percent. (Round to the nearest
dollar.)
a. If the discount rate is 5 percent, then the project's NPV is:
$1,150,225
Question 2: (30 points). (Net present value calculation) Big
Steve's, makers of swizzle sticks, is considering the purchase of
a new plastic stamping machine. This investment requires an

initial outlay of $90,000 and will generate net cash inflows of
$19,000 per year for 11 years. To answer Orange item
questions, keep the text that is the best answer.
a. What is the project's NPV using a discount rate of 7 percent?
(Round to the nearest dollar.)
$49,042
Should the project be accepted?
The project
should be
accepted because the NPV is
positive
and therefore
adds
value to the firm.
b. What is the project's NPV using a discount rate of 16
percent?
$4,779
Yes it should be accepted since the present value is positive
c. What is this project's internal rate of return? (Round to two
decimal places.)

This project's internal rate of return is:
18%
should be
higher than
should be
higher than
Question 3: (15 points). (Related to Checkpoint 11.2)
(Equivalent annual cost calculation) Barry Boswell is a
financial analyst for Dossman Metal Works, Inc. and he is
analyzing two alternative configurations for the firm's new
plasma cutter shop. The two alternatives that are denoted A and
B below perform the same task and although they each cost to
purchase and install they offer very different cash flows.
Alternative A has a useful life of 7 years whereas Alternative B
will only last for 3 years. The after-tax cash flows from the two
projects are as follows:
a. Calculate each project's equivalent annual cost (EAC) given a

discount rate of 10 percent. (Round to the nearest cent.)
a. Alternative A's equivalent annual cost (EAC) at a discount
rate of 10% is:
$19,091.51
b. Alternative B's equivalent annual cost (EAC) at a discount
rate of 10% is
$5,038.20
b. Which of the alternatives do you think Barry should select?
Why? (Select the best choice below.)
a. This cannot be determined from the information provided.
b. Alternative B should be selected because its equivalent
Alternative A.
c. Alternative A should be selected because its equivalent
Alternative B.
d. Alternative A should be selected because it has the highest
NPV.
Answer: b
Question 4: (10 points). (IRR calculation) What is the internal
rate of return for the following project: An initial outlay of
$9,000 resulting in a single cash inflow of $15,424 in 7 years.
(Round to the nearest whole percent.)
a. The internal rate of return for the project is:
7%

Question 5: (10 points). (IRR calculation) Jella Cosmetics is
considering a project that costs $750,000 and is expected to last
for 9 years and produce future cash flows of $180,000 per year.
If the appropriate discount rate for this project is 17 percent,
what is the project's IRR? (Round to two decimal places.)
a. The project's IRR is:
19%
Question 6: (10 points) (IRR, payback, and calculating a
missing cash flow) Mode Publishing is considering a new
printing facility that will involve a large initial outlay and then
result in a series of positive cash flows for four years. The
estimated cash flows associated with this project are:
If you know that the project has a regular payback of 2.9 years,
what is the project's internal rate of return?
a. The IRR of the project is:
15%
Question 7: (15 points) (Mutually exclusive projects and NPV)
You have been assigned the task of evaluating two mutually
exclusive projects with the following projected cash flows:
If the appropriate discount rate on these projects is 11 percent,
which would be chosen and why? (Round to the nearest cent.)

a. The NPV of Project A is:
$790
b. The NPV of Project B is:
$13,175.48
Which project would be chosen and why? (Select the best
choice below.)
a. Cannor choose without comparing their IRRs.
b. Choose A because its NPV is higher.
c. Choose both because they both have positive NPVs.
d. Choose B because its NPV is higher.
Answer: d
BBA 3301 Unit V Assignment
you are finished, select Save As, and save this document using
your last name and student ID as the file name. Upload the data
sheet to Blackboard as a .doc, .docx or .rtf file when you are
finished.
Question 1. (30 points total) Use this balance sheet and income
statement from Carver Enterprises to complete parts a and b:
a. (15 points) Prepare a common size balance sheet for Carver
Enterprises. Complete the common-size balance sheet: (Round

to one decimal place.)
Common−Size Balance Sheet
2013
Cash and marketable securities
$
490
1.5
%
Accounts receivable
5,990
18.1
Inventories
9,550
28.9
Current assets
$
16,030
48.9
%
Net property plant and equipment
17,030
51.5
Total assets
$
33,060
100

%
Accounts payable
$
7,220
21.8
%
Short−term debt
6,800
20.6
Current liabilities
$
14,020
42.4
%
Long−term liabilities
7,010
21.4
Total liabilities
$
21,030
63.6
%
Total owners’ equity
12,030
36.4
Total liabilities and owners’ equity
$
33,060
100
%

b. (15 points) Prepare a common-size income statement for
Carver Enterprises. Complete the common-size income
statement: (Round to one decimal place.)
Common−Size Income Statement
2013
Revenues
$
30,020
100
%
Cost of goods sold
(19,950)
-68.5
Gross profit
$
10,070
33.5
%
Operating expenses
(7,960)
-26.5
Net operating income
$
2,110
7
%
Interest expense

(940)
-3.1
Earnings before taxes
$
1,170
3.9
%
Taxes
(425)
-1.4
Net income
$
745
2.5
%
Question 2. (10 points total) Use this data table of Campbell
Industries liabilities and owners' equity to complete parts a and
b.
a. (5 points) What percentage of the firm's assets does the firm
finance using debt (liabilities)? (Round to one decimal place.)
29.7%
b. (5 points) If Campbell were to purchase a new warehouse for
$1.3 million and finance it entirely with long-term debt, what
would be the firm's new debt ratio? (Round to one decimal
place.)
39.4%

Question 3. (10 points total) (Liquidity analysis)Airspot Motors,
Inc. has $2,433,200 in current assets and $869,000 in current
liabilities. The company's managers want to increase the firm's
inventory, which will be financed using short-term debt. How
much can the firm increase its inventory without its current
ratio falling below 2.1 (assuming all other assets and current
liabilities remain constant)? (Round to one decimal place.)
$553,000.00
Question 4. (10 points total) (Efficiency analysis)Baryla Inc.
manufactures high quality decorator lamps in a plant located in
eastern Tennessee. Last year the firm had sales of $93 million
and a gross profit margin of 45 percent.
a. (5 points) How much inventory can Baryla hold and still
maintain an inventory turnover ratio of at least 6.3 times?
(Round to one decimal place.)
8,298,650.8
b. (5 points) Currently, some of Baryla's inventory includes
$2.3 million of outdated and damaged goods that simply remain
in inventory and are not salable. What inventory ratio must the
good inventory maintain in order to achieve an overall turnover
ratio of at least 6.3 (including the unsalable items)? (Round to

one decimal place.)
$5,819,047.60
Question 5. (15 points total) (Profitability and capital structure
analysis)In the year that just ended, Callaway Lighting had
sales of $5,470,000 and incurred cost of goods sold equal to
$4,460,000. The firm's operating expenses were $128,000 and
its increase in retained earnings was $42,000 for the year. There
are currently 99,000 common stock shares outstanding and the
firm pays a $4.770 dividend per share. The firm has $1,180,000
in interest-bearing debt on which it pays 7.7 percent interest.
a. (5 points) Assuming the firm's earnings are taxed at 35%,
construct the firm's income statement.
Income Statement
Revenues
$
5470000
Cost of Goods Sold
4460000
Gross Profit
$
101000
Operating Expenses
128000
Net Operating Income

$
882000
Interest Expense
90860
Earnings before Taxes
$
791140
Income Taxes
276899
Net Income
$
51424
b. (5 points) Calculate the firm's operating profit margin and net
profit margin. (Round to one decimal place.)
The operating profit margin is
16.1
%
The net income margin is
9.4
%
c. (5 points) Compute the times interest earned ratio.
The times interest earned ratio is
970.7
%
What does this tell you about Callaway's ability to pay its
interest expense? (Fill in the blank with the times interest
earned ratio from above and select the best choice.)
1) Callaway's operating income can fall as much as ____9.7__
times the interest expense and the company would still be able

to service its debt.
2) Callaway's interest expense is _9.7______ times higher than
its competitors.
3) Callaway's gross profit can fall as much as ___78.3___ times
and still be able to service its debt.
4) Callaway's operating income can fall as much as __89.7____
times and still be able to repay its debt.
Answer: 1
What is the firm's return on equity? (Select the best choice.)
1) The firm's return on equity is the same as the net profit
margin, 9.4%.
2) The firm's return on equity is the sum of the operating profit
margin and the net profit margin, 25.5%.
3) There is not enough information to answer this question.
4) The firm's return on equity is the same as the operating profit
margin, 16.1%.
Answer: 3
Question 6. (5 points total) (Market value analysis) Lei
Materials' balance sheet lists total assets of $1.16 billion, $132
million in current liabilities, $415 million in long-term debt,
$613 million in common equity, and 58 million shares of
common stock. If Lei's current stock price is $52.08, what is the
firm's market-to-book ratio? (Round to one decimal place.)

4.9
Question 7. (5 points total) (DuPont analysis)Bryley, Inc.
earned a net profit margin of 5.1 percent last year and had an
equity multiplier of 3.49. If its total assets are $109 million and
its sales are $157 million, what is the firm's return on equity?
(Round to one decimal place.)
10.3%
Question 8. (15 points total) (Calculating financial ratios) Use
the balance sheet and income statement for the J. P. Robard
Mfg. Company to calculate the following ratios:
Current ratio (Round to two decimal places.)
1.65
Times interest earned (Round to two decimal places.)
4.55
times
Inventory turnover (Round to two decimal places.)
3.65
times
Total asset turnover (Round to two decimal places.)
1.03
Operating profit margin (Round to one decimal places.)
20.7

%
Operating return on assets (Round to one decimal places.)
21.20
%
Debt ratio (Round to one decimal places.)
50.5
%
Average collection period (Round to one decimal places.)
87.7
days
Fixed asset turnover (Round to two decimal places.)
1.78
Return on equity (Round to one decimal places.)
20.10
%
Running Head: Finance Assessment

1
Finance Assessment
4
Finance Assessment
Student’s Name
Institutional Affiliation
1. After placing $8,000 in a savings account paying annual
compound interest of 8%, calculate the amount that will
accumulate if it is left for 8 years?
FV = PV X (1 +r) n
= 8,000 x (1.08)8
= $14,807.44
2. If you deposit $17,000 today in an account earning an annual
rate of return of 10%, how much interest would be earned in the
third year? How much would this amount differ from simple
interest?

Compound Interest
FV = PV X (1 +r) n
= 17,000 x (1.1)3
= $22,627
Simple interest
Principal X Rate x Time
= 17,000 x 10% x 3
= 17,000 + 5100
= 22,100
Difference
$22,627 - $22,100
= $527
3. To pay for your education, you have taken out $28,000 in
student loans. If you make monthly payments over 13 years at
5% compounded monthly, how much are your monthly student
loan payments?
Balance
28000
Interest rate
0.05
Periods
156
Monthly Payment
($1,400.69)
4. What is the present value of a $650 perpetuity discounted

back to the present at 10%? What is the present value of the
perpetuity?
PV = Coupon per period/ Discount rate
PV = $650/0.10
= $6,500
5. How much do you have to deposit today so that, beginning 11
years from now, you can withdraw $9,000 a year for the next 8
years (periods 11 through 18) plus an additional amount of
$18,000 in the last year (period 18)? Assume an interest rate of
6%.
PV = 9000((1-(1+0.06)-8)/0.06)
=$55,888.14
PV = FV/ (1+I) n
= 55,888.14/ (1+0.06)10
= 31,207. 64
References
Titman, S., Keown, A. J., & Martin J. D. (2014). Financial
management: Principles and applications (12th ed.). Upper
Saddle River, NJ: Pearson.
Pearson, G., Brown, R., Easton, S., & Howard, P.
(2014). Business finance. McGraw-Hill Education Australia.
Bodie, Z. (2013). Investments. McGraw-Hill.
3-13Problem 3-13Warner Company Balance SheetWarner
Company Income StatementCurrent AssetsSales $
573,000.00Cash 225,000Cost of goods sold 297,000.00Accounts
Receivable 167,500276,000.00Inventory 99,300Total Current

Assets 491,800General and administrative expense
79,000.00Long Term (fixed) assetsinterest expense
4,750.00Buildings and Equipment 895,000Accrued expense
7,900.00Accumulated depreciation-263,000Depreciation
expense66,000.00Total Long term debt632,000Operating
Income 157,650.00Total Assets 1,123,800Current Liabilities
Taxes 50,500.00Accounts payable102,000Net income $
107,150.00Notes payable 75,000Taxes payable 53,000Accrued
expenses7,900237,900Long-term LiabilitiesLong term debt
334,000Total Liabilities 571,900Owners EquityCommon Stock
289,000Retained Earnings 262,900551,900Total liabilities and
equity1,123,800Q. What can you say about the firm’s financial
condition based on these financial
statements?The company is in a good financial condition. The
company has good liquidity. The company also has good a good
debt ratio that ensures that it has good leverage. The company
also has very good profitability. Q. Using the CSU Online
Library find one article that discuses financial statements, cash
flow, or ratio analysis. Briefly summarize the key points of the
article as it relates to this unit. You may use any of the
databases, but Business Source Complete is a good starting
place.The success of a business depend on its cash flow. Signs
of poor cash flow include less cash in the bank than
expenditure. The company gets problems when payaing its
accounts payable and this can take even 90 days. Lack of a
process that determines the credit worthiness of the company's
customers.
3-15Problem 3-15Answer the following four questions using the
information found in the statements.a. Does BigBox generate
positive cash flow from its operations?Yes, the company
generates positive cash flows from its operations. b. How much
did BigBox invest in new capital expenditures over the last four
years? 2013 2012 2011
2010
1 16,000 14,500 14,000 12,300
Total $56,800c. Describe BigBox’s sources of financing

in the financial markets over the last four years.The company
has two sources of financing. The company is financed through
debt and through equity. The company has been retiring its
stock over the last years. The company has however issued debt
for 3 of the 4 years. The company also pays interest and
dividends. d. Based solely on the cash flow statement for 2010
through 2013, write a brief narrative that describes the major
activities of BigBox’s management team over the last four
years.The major activities for the two years are net income,
capital expenditures , depreciation expense and retirement of
stock.
4-25Problem 4-25Instructions to use the
Solution
TemplateStep 1Enter the given values from the textbook on
page 116 in the yellow colored cells below.Step 2In Cell E52,
Calculate Current ratio using formula "Current Assets / Current
Liabilities"Step 3In Cell E53, Calculate Times interest earned
using formula "Net Operating Income/ Interest Expense"Step
4In Cell E54, Calculate Inventory Turnover using formula "Cost
of goods sold/ Inventory"Step 5In Cell E55, Calculate Total
Asset turn Over using formula "Net Sales / Total Assets"Step
6In Cell E56, Calculate Operating Profit Margin using formula
"Net Operating Income / Net Sales"Step 7In Cell E57, Calculate
Operating Return on Assets using formula "Net Operating
Income / Total Assets"Step 8In Cell E58, Calculate Debt Ratio
using formula "( Current Liabilities + Long-term debt) / Total

Assets"Step 9In Cell E59, Calculate Average Collection Period
using formula "( Accounts Receivable * 365 ) / Credit Sales
"Step 10In Cell E60, Calculate Fixed Asset Turnover using
formula "Net Sales / Net Fixed Assets "Step 11In Cell E61,
Calculate Return on Equity using formula "Net Income /
Owner's Equity"GivenJ. P. Robard Mfg., Inc.Balance Sheet
($000)Cash$500.00
Author: Enter the given values from the text book here
Accounts receivable$2,000.00Inventories$1,000.00Current
assets$3,500.00Net fixed assets$4,500.00Total
assets$8,000.00Accounts payable$1,100.00Accrued
expenses$600.00Short-term notes payable$300.00Current
liabilities$2,000.00Long-term debt$2,000.00Owners’
equity$4,000.00Total liabilities and owners’ equity$8,000.00J.
P. Robard Mfg., Inc.Income Statement ($000)Net sales (all
credit)$8,000.00Cost of goods sold$3,300.00Gross
profit$4,700.00Operating expenses (includes $500
depreciation)($3,000.00)Net operating income$1,700.00Interest
expense($367.00)Earnings before taxes$1,333.00Income taxes
(40%)($533.00)Net income$800.00

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