公司理财课后小案例答案.pdf

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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+159-386OCF=$1,105To calculate the cash flow from assets,we n

2、eed to find the capital spending and change in networking capital.The capital spending for the year was:Capital spendingEnding net fixed assets$2,280-Beginning net fixed assets 1,792+Depreciation 159Net capital spending$647And the change in net working capital was:Change in net working capitalEnding

3、 NWC$728-Beginning NWC 586Change in NWC$142So,the cash flow from assets was:Cash flow from assetsOperating cash flow$1,105-Net capital spending 647-Change in NWC 142Cash flow from assets$316The cash flow to creditors was:Cashflow to creditorsInterest paid$95-Net New Borrowing 20Cash flow to Creditor

4、s$752The cash flow to stockholders was:Cash flow to stockholdersDividends paid$212-Net new equity raised-29Cash flow to Stockholders$241The accounting cash flow statement of cash flows for the year was:Statement of Cash FlowsOperationsNet income$742Depreciation 159Deferred taxes 109Changes in assets

5、 and liabilitiesAccounts receivable(31)Inventories 14Accounts payable 17Accrued expenses(99)Other(9)Total cash flow from operations$902Investing activitiesAcquisition of fixed assets$(786)Sale of fixed assets 139Total cash flow from investing activities$(547)Financing activitiesRetirement of debt$(9

6、8)Proceeds of long-term debt 118Notes payable 5Dividends(212)Repurchase of stock(40)Proceeds from new stock issues 11Total cash flow from financing activities$(216)Change in cash(on balance sheet)$393A-swery to questions1.The firm had positive earnings in an accounting sense(NI 0)and had positive ca

7、sh flow fromoperations and a positive cash flow from assets.The firm invested$142 in new net working capitaland$647 in new fixed assets.The firm was able to return$241 to its stockholders and$75 tocreditors.2.The financial cash flows present a more accurate picture of the company since it accurately

8、 reflectsinterest 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 asignificant amount of cash to its shareholders during the year,but a better use of these cash flows mayhave been to ret

9、ain them for the expansion.This decision will be discussed in more detail later in thebook.4CHAPTER 3RATIOS AND FINANCIAL PLANNING ATEAST COAST YACHTSThe calculations for the ratios listed are:Current ratio=$14,651,000/$19,539,000Current ratio=0.75 timesQuick ratio=($14,651,000-6,136,000)/$19,539,00

10、0Quick ratio=0.44 timesTotal asset turnover=$167,310,000/$108,615,000Total asset turnover=1.54 timesInventory turnover=$117,910,000/$6,136,000Inventory turnover=19.22 timesReceivables turnover=$167,310,000/$5,473,000Receivables turnover=30.57 timesTotal debt ratio=($108,615,000-55,341,000)/$108,615,

11、000Total debt ratio=0.49 timesDebt-equity ratio=($19,539,000+33,735,000)/$55,341,000Debt-equity ratio=0.96 timesEquity multiplier=$108,615,000/$55,341,000Equity multiplier=1.96 timesInterest coverage=$23,946,000/$3,009,000Interest coverage=7.96 timesProfit margin=$12,562,200/$167,310,000Profit margi

12、n=7.51%Return on assets=$12,562,200/$108,615,000Return on assets=11.57%Return on equity=$12,562,000/$55,341,000Return on equity=22.70%5Regarding the liquidity ratios,East Coast Yachts current ratio is below the median industry ratio.This implies the company has less liquidity than the industry in ge

13、neral.However,the current ratiois above the lower quartile,so there are companies in the industry with lower liquidity than EastCoast Yachts.The company may have more predictable cash flows,or more access to short-termborrowing.The turnover ratios are all higher than the industry median;in fact,all

14、three turnover ratios areabove the upper quartile.This may mean that East Coast Yachts is more efficient than the industryin using its assets to generate sales.The financial leverage ratios are all below the industry median,but above the lower quartile.EastCoast Yachts generally has less debt than c

15、omparable companies,but is still within the normalrange.The profit margin for the company is about the same as the industry median,the ROA is slightlyhigher than the industry median,and the ROE is well above the industry median.East Coast Yachtsseems to be performing well in the profitability area.O

16、verall,East Coast Yachts performance seems good,although the liquidity ratios indicate that acloser look may be needed in this area.6Below is a list of possible reasons it may be good or bad that each ratio is higher or lower than theindustry.Note that the list is not exhaustive,but merely one possi

17、ble explanation for each ratio.RatioGoodBadCurrent ratioBetter at managing currentaccounts.May be having liquidity problems.Quick ratioBetter at managing currentaccounts.May be having liquidity problems.Total asset turnoverBetter at utilizing assets.Assets may be older anddepreciated,requiring exten

18、siveinvestment soon.Inventory turnoverBetter at inventory management,possibly due to better procedures.Could be experiencing inventoryshortages.Receivables turnoverBetter at collecting receivables.May have credit terms that are toostrict.Decreasing receivablesturnover may increase sales.Total debt r

19、atioLess debt than industry medianmeans the company is less likelyto experience credit problems.Increasing the amount of debt canincrease shareholder returns.Especially notice that it willincrease ROE.Debt-equity ratioLess debt than industry medianmeans the company is less likelyto experience credit

20、 problems.Increasing the amount of debt canincrease shareholder returns.Especially notice that it willincrease ROE.Equity multiplierLess debt than industry medianmeans the company is less likelyto experience credit problems.Increasing the amount of debt canincrease shareholder returns.Especially not

21、ice that it willincrease ROE.Interest coverageLess debt than industry medianmeans the company is less likelyto experience credit problems.Increasing the amount of debt canincrease shareholder returns.Especially notice that it willincrease ROE.Profit marginThe PM is slightly above theindustry median,

22、so it isperforming better than manypeers.May be able to better controlcosts.ROACompany is performing abovemany of its peers.Assets may be old and depreciatedrelative to industry.ROECompany is performing abovemany of its peers.Profit margin and EM could stillbe increased,which would furtherincrease R

23、OE.If you created an Inventory to Current liabilities ratio,East Coast Yachts would have a ratio that islower than the industry median.The current ratio is below the industry median,while the quickratio is above the industry median.This implies that East Coast Yachts has less inventory to currentlia

24、bilities than the industry median.Because the cash ratio is lower than the industry median,EastCoast Yachts has less inventory than the industry median,but more accounts receivable.73.To calculate the internal growth rate,we first need to find the ROE and the retention ratio,so:ROE=NI/TEROE=$12,562,

25、200/$55,341,000ROE=.2270 or 22.70%b=Addition to RE/NIb=$5,024,800/$12,562,200b=0.40 or 40%So,the sustainable growth rate is:Sustainable growth rate=(ROE x b)/1-(ROE x/?)Sustainable growth rate=0.2270(.40)/I-0.2270(.40)Sustainable growth rate=.0999 or 9.99%The sustainable growth rate is the growth ra

26、te the company can achieve with no external financingwhile 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$26,882,666Interest3,009,000T

27、axable income$23,873,666Taxes(40%)9,549,466Net income$14,324,199Dividends$8,594,520Add to RE5,729,6808Assets Liabilities&EquityBalance sheetCurrent AssetsCurrent LiabilitiesCash$3,345,793Accounts Payable$7,106,236Accounts rec.6,019,568Notes Payable14,384,050Inventory6,748,779Total CL$21,490,286Total

28、 CA$16,114,140Long-term debt$33,735,000Shareholder EquityCommon stock$5,200,000Fixed assetsRetained earnings55,870,680Net PP&E$103,347,828Total Equity$61,070,680Total Assets$119,461,968Total L&E _$116,295,966So,the EFN is:EFN=Total assets-Total liabilities and equityEFN=$119,461,968-116,295,966EFN=$

29、3,166,002The ratios with these pro fbrma statements are:Current ratio=$16,114,140/$21,490,286Current ratio=0.75 timesQuick ratio=($16,114,140-6,748,779)/$21,490,286Quick ratio=0.44 timesTotal asset turnover=$184,018,615/$119,461,968Total asset turnover=1.54 timesInventory turnover=$129,685,224/$6,74

30、8,779Inventory turnover=19.22 timesReceivables turnover=$184,018,615/$6,019,568Receivables turnover=30.57 timesTotal debt ratio=($116,295,966-61,070,680)/$116,295,966Total debt ratio=0.49 timesDebt-equity ratio=($21,490,286+33,735,000)/$61,070,680Debt-equity ratio=0.90 times9Equity multiplier=$119,4

31、60,968/$61,070,680Equity multiplier=1.96 timesInterest coverage=$26,882,666/$3,009,000Interest coverage=8.93 timesProfit margin=$14,324,199/$184,018,615Profit margin=7.78%Return on assets=$14,324,199/$119,461,968Return on assets=11.99%Return on equity=$14,324,199/$61,070,680Return on equity=23.45%Th

32、e only ratios that changed are the debt ratio,the interest coverage ratio,profit margin,return onassets,and return on equity.The debt ratio changes because long-term debt is assumed to remainfixed in the pro forma statements.The other ratios change slightly because interest and depreciationare also

33、assumed to remain constant as well.Pro forma financial statements for next year at a 20 percent growth rate arc:Income statementSales$200,772,000COGS141,492,000Other expenses23,992,800Depreciation5,460,000EBIT$29,827,200Interest3,009,000Taxable income$26,818,200Taxes(40%)10,727,280Net income$16,090,

34、920Dividends$9,654,552Add to RE6,436,36810Assets Liabilities&EquityBalance sheetCurrent AssetsCurrent LiabilitiesCash$3,650,400Accounts Payable$7,753,200Accounts rec.6,567,600Notes Payable15,693,600Inventory7,363,200Total CL$23,446,800Total CA$17,581,200Long-term debt$33,735,000Shareholder EquityCom

35、mon stock$5,200,000Fixed assetsRetained earnings56,577,368Net PP&E$112,756,800Total Equity$61,777,368Total Assets$130,338,000Total L&E _$118,959,168So,the EFN is:EFN=Total assets-Total liabilities and equityEFN=$130,338,000-118,959,168EFN=$8,753,040Now we are assuming the company can only build in a

36、mounts of S30 million.We will assume thatthe company will go ahead with the fixed asset acquisition.In this case,the pro forma financialstatement calculation will change slightly.Before,we made the assumption that depreciationincreased proportionally with sales,which makes sense if fixed assets incr

37、ease proportionally withsales.This is not the case now.To estimate the new depreciation charge,we will find the currentdepreciation as a percentage of fixed assets,then,apply this percentage to the new fixed assets.Thedepreciation as a percentage of assets this year was:Depreciation percentage=$5,46

38、0,000/$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=$123,964,000So,the pro fbrma depreciation as a percentage of sales will be:Pro fbrma depreciation=.0581(5123,964,000)Pro forma depreciatio

39、n=$7,203,22111We will use this amount in the pro form income statement.So,the pro forma income statement willbe:Income statementSales$200,772,000COGS141,492,000Other expenses23,992,800Depreciation7,203,221EBIT$28,083,979Interest3,009,000Taxable income$25,074,979Taxes(40%)10,029,992Net income$15,044,

40、988Dividends$9,026,993Add to RE6,017,995The pro forma balance sheet will remain the same except fbr the fixed asset and equity accounts.Thefixed asset account will increase by$30 million,rather than the growth rate of sales.Assets Liabilities&EquityBalance sheetCurrent AssetsCurrent LiabilitiesCash$

41、3,650,400Accounts Payable$7,753,200Accounts rec.6,567,600Notes Payable15,693,600Inventory7,363,200Total CL$23,446,800Total CA$17,581,200Long-term debt$33,735,000Shareholder EquityCommon stock$5,200,000Fixed assetsRetained earnings56,158,995Net PP&E$123,964,000Total Equity$61,358,995Total Assets$141,

42、545,200Total L&E$118,540,795So,the EFN is:EFN=Total assets-Total liabilities and equityEFN=$141,545,200-118,540,795EFN=$23,004,405Since the fixed assets have increased at a faster percentage than sales,the capacity utilization fbrnext year will decrease.12CHAPTER 4THE MBA DECISION1.Age is obviously

43、an important factor.The younger an individual is,the more time there is for the(hopefully)increased salary to offset the cost of the decision to return to school for an MBA.Thecost includes both the explicit costs such as tuition,as well as the opportunity cost of the lost salary.2.Perhaps the most

44、important nonquantifiable factors would be whether or not he is married and if hehas any children.With a spouse and/or children,he may be less inclined to return for an MBA sincehis family may be less amenable to the time and money constraints imposed by classes.Other factorswould include his willin

45、gness and desire to pursue an MBA,job satisfaction,and how important theprestige of a job is to him,regardless of the salary.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 arc irrelevant since presumably they will b

46、e the same whetherhe attends college or keeps his current job.We need to find the aftertax value of each,so:Remain at cu门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 l/(r-g)-l/(r-5)x(l+g)/(l+r)BPV=$44,400l/(.

47、065-.03)-l/(.065-.03)x(1+.03)/(1+.O65)40PV=$935,283.49痴 MBA:Costs:The direct costs will occur today and in one year and include tuition,books and supplies,healthinsurance,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,

48、000+2,500)/1.065PV of direct expenses=$141,544.60The indirect 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)2PV of indirect costs(lost salary)=$82,010.1813The financial benefits arc the bonus to be paid in 2

49、 years and the future salary.PV of aftertax 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 fbr 38years,so the present value of his aftertax salary is:PV=C l/(r-5)

50、-l/(r-g)x(1+g)/(l+r)了 PV=$75,900l/(.065-.04)-l/.065-.04)x(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 fortwo years to find the value today,which will be:PV=$1,804,927.68/1.0652PV=$1,591,331.25So,the total value