Posted: September 16th, 2017

Finance – Prepare a cash flow statement for the following information.

Question 1.
a. Prepare a cash flow statement for the following information.
b. Include a cash reconciliation statement.

Balance Sheet

Jan 1 Dec 31
ASSETS:
Current Assets:
Cash 310,000 600,000
Marketable Securities 1,200,000 1,000,000
Accounts Receivable, net 290,000 330,000
Inventory 3,000,000 4,000,000
Prepaid Expenses 200,000 300,000
Total Current Assets 5,000,000 6,230,000

Total Fixed Assets, net 2,500,000 2,000,000

Total Assets 7,500,000 8,230,000

LIABILITIES & EQUITIES
Current Liabilities:
Accounts Payable 1,500,000 1,000,000
Notes Payable 1,000,000 1,000,000
Accrued Expenses 500,000 800,000
Total Current Liabilities 3,000,000 2,800,000

Total Long-term Liabilities 1,000,000 1,500,000
Total Liabilities 4,000,000 4,300,000

Preferred Stock 500,000 500,000
Common Stock 500,000 500,000
Capital in Excess of Par 1,000,000 1,000,000
Retained Earnings 1,500,000 1,930,000
Total Stockholders Equity 3,500,000 3,930,000

Total Liabilities and Equity 7,500,000 8,230,000

Income Statement (for ques 1)

Sales 10,000,000
COGS 6,000,000
Gross Profit 4,000,000
Administrative expenses 1,200,000
Depreciation 500,000
EBIT 2,300,000
Interest Expense 500,000
EBT 1,800,000
Taxes (40%) 720,000
Net Income 1,080,000
Question 2 Table 5-1

Income Statement Balance Sheet

Sales $20,000,000 Assets:
Cost of Goods Sold 8,000,000 Cash $ 5,000,000
12,000,000 Marketable Securities 12,500,000
Selling and Administrative 1,600,000 Accounts Receivable, net 2,500,000
Depreciation 3,000,000 Inventory 30,000,000
7,400,000 Prepaid Expenses 5,000,000
Interest 2.000,000 Plant & Equipment 30,000,000
5,400,000
Taxes (40%) 2,160,000 Total Assets 85,000,000
3,240,000
Common Stock Div. 600,000 Liabilities and Equity:
$2,640,000 Accounts Payable $20,000,000
Notes Payable 5,000,000
Accrued Expenses 5,000,000
Bonds 25,000,000
Common Stock 5,000,000
Capital in Excess of Par 10,000,000
Retained Earnings 15,000,000

Total Liabilities and
Equity $85,000,000
Shares outstanding of common stock = 1,000,000
Market price of common stock = $18.

Use Table 5-1 for the following 15 questions.

2-1. The Current Ratio is:
2-2. The Net Profit margin is:
2-3. The Quick Ratio is:
2-4. The Times Interest Earned ratio is:
2-5. The Earnings Per Share is:
2-6. The Gross Profit Margin is:
2-7. The Total Debt to Total Asset ratio is:
2-8. Return on Assets ratio is:
2-9. The Total Asset Turnover ratio is:
2-10. The Operating Profit Margin is:
2-11. The Average Collection Period (365 day year) is:
2-12. The Market to Book ratio is:
2-13. The Debt to Equity ratio is:
2-14. The Inventory Turnover ratio is:
2-15. The Return on Equity is:

For Questions 3 through 9, please provide 2 answers for the same question, using 2 different solution methods (i.e., factor tables, MS Excel, financial calculator, or algebraically.

Question 3
Calculate the present value of annual payments of $3,000 per year for ten years at 8%:
a. Ordinary Annuity

b. Annuity Due

Question 4

How much will you have at the end of the 6th year if you invest $5,000 annually for six
years at 7% annual rate, if you:
a. Start one year from today
b. Start today

Question 5
How long it will take for $2,500 to become $8,865 if it is deposited and earns 5% per
year compounded annually? (Calculate to the closest year.)

Question 6

Sum the present values of the following cashflows to be received at the end of each of the
next six years $1,500, $3,500, $3,750, $4,250, $5,000, $5,000 when the annual discount
rate is 4%.

Question 7
A bank agrees to give you a loan of $12,000,000 and you have to pay $1,309,908 per
year (end of year) for 26 years. What is your rate of interest?

Question 8
Calculate the present value of each of the alternatives below, if the discount rate is 12%.
a. $45,000 today in one lump sum.
b. $70,000 paid to you in seven equal payments of $10,000 each at the end of each of the next seven years.
c. $80,000 paid in one lump sum 7 years from now.

Question 9

You are negotiating for the terms of a legal settlement, and your opponent’s attorney has
presented you with the following alternative settlement alternatives:

a. $38,000 today in one lump sum.
b. $50,000 to be paid to you in five equal payments of $10,000 at the end of each of the
next five years.
c. Five equal annual installments of $9,100 each, beginning today.

If your discount rate is 10%, what is the present value of each of the alternatives and
which alternative would you choose, and why?

Question 10

Oleans, Inc. projects sales to be $100,000; $90,000; $95,000 during the months of
August, September, and October respectively. Salaries are projected to be $12,000 plus
5% of sales. Purchases are 50% of sales for the month and paid in the month of purchase.
A tax payment of $60,000 and an equipment purchase of $20,000 will be made in
September. Transactions are for cash, and a ($20,000) cash balance starts the month
of August. The firm maintains a minimum target end of month balance of $6,000. There
is no limit as to how high the cash balance can be.

Calculate the ending cash balance after any deficit is financed to achieve the target level
for each of the three months.

Question 11
Following is the balance sheet for the end of the year 2013 for Silver Spurs, Inc.:

2013 2014

Current Assets $15,000
Net Fixed Assets 20,000
Total Assets $35,000

Accounts Payable $ 2,000
Notes Payable 1,000
Long-Term Debt 10,000
Common Equity 22,000
Total Liabilities/Equity $35,000

They have generated sales for 2013 of $35,000 resulting in net income of $15,000. Due to the difficulty associated with acquiring raw materials, Silver Spurs has experienced sluggish business that has caused fixed assets to be underutilized. Management thinks it can double sales in 2014 through the introduction of a new product. No new fixed assets will be required and the dividend payout ratio will be 100%. Assume no additional deprecation expense will be taken in 2014. Project next year’s balance sheet in the space provided above to determine the additional funding needed (AFN) for this new product. Assume notes payable at the end of 2013 are paid off in 2014.

Question # 12:
What is the value of a ten-year $1,000 par-value bond with a 8% annual coupon rate and the market rate of interest is 10%?
Question 13. Indicate which of the following bonds seems to be reported incorrectly with respect to discount, premium, or par and explain why.

Bond Price Coupon Rate Yield to Maturity

A 105 9% 8%
B 100 6% 6%
C 101 5% 4.5%
D 102 0% 5%

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