Introduction to Finance Markets Investments and Financial Management 15th edition Melicher Ronald, Norton Edgar - Solutions

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a. Equation 15.7 shows that market value added (MVA) of an investment project is the present value of the stream of the future economic value added (EVA) of the project. Because a firm can be viewed as a basket of investment projects, the MVA of a firm is simply the present value of the stream of
Below are the last three years' financial statements of Sentec Inc., a distributor of electrical fixtures.a. Compute Sentec's working capital requirement (WCR) on December 31, 2008, 2009, and 2010.b. Prepare Sentec Inc.'s managerial balance sheets on December 31, 2008, 2009, and 2010.c. Sentec's
Fiona Berling's division of McSystems generates a net operating profit after tax, or NOPAT, of $1 million on an invested capital base of $1 million. The weighted average cost of capital of Ms. Berling's division is 20 percent. The division has been asked to launch a new investment project that
Astra Co. is considering introducing a bonus system based on economic value added (EVA) and has short-listed two bonus formulas. The first one would simply compute the bonus as a percentage of EVA, such that Bonus = x percent of EVA = x% × EVA The second bonus formula will make the bonus dependent
Alvinstar Co. is considering investing in a new animal feed project. The product will be a soup for cats to be sold in cans. Alvinstar plans to sell 100,000 cans a year for four years at a price of $4 per can. Fixed costs will include rent on the production facility at $50,000 a year, plus annual
The Electronics Machines Corporation (EMC) is considering buying a $300,000 piece of equipment that could raise EMC's sales revenues by $1 million the first year, $2 million the second year, and $1.8 million the third year. The cost of the piece of equipment can be fully depreciated over the
It has often been said that a business should begin with a vision or mission statement. Explain what that means.
Identify and briefly describe the three major forms of business ownership used in the United States.
What are the differences in owner liability in proprietorships and partnerships versus corporations?
Briefly describe the differences between a subchapter S corporation and a limited liability company.
What types of information are included in an annual report?
General accounting practice is based upon the accrual concept. Explain what this means and briefly describe how this compares with the financial manager’s focus on cash.
What is the purpose of the income statement? Also, briefly identify and describe the major types of expenses that are shown on the typical income statement.
What is the purpose of the balance sheet? Briefly identify and describe the major types of assets and the claims of creditors and owners shown on the typical balance sheet.
Describe the three different accounts that comprise the owners’ equity section on a typical corporate balance sheet.
How can common-size financial statements be used?
How are industry-operating differences reflected in a firm’s financial statements?
What was GM’s financial position prior to its bailout in 2009? How did the bailout improve its financial position?
What steps did Ford take from 2008 to 2009, as seen by its balance sheet?
What does it mean when a firm’s MVA is negative?
How are financial strategy and financial plans linked together?
What is meant by the principal-agent problem in the context of corporate governance?
Discuss some ways agents can make self-serving decisions.
What is restricted stock? How does it improve managerial incentives compared to the use of stock options?
Describe four provisions of the Sarbanes-Oxley Act.
Use the “balance sheet equation” to determine owners’ equity if liabilities are $5 million and assets are $10 million.
Use your knowledge of balance sheets to fill in the amounts missing in the text.
Use your knowledge of balance sheets to fill in the amounts missing in the text.
Use your knowledge of balance sheets and common-size statements to fill in the missing dollar amounts.
Use your knowledge of income statements to fill in the missing items.Sales $ = Gross profit + COGSCOGS
Use the following information to construct an income statement.Interest = $25,000;Sales = $950,000;Income tax rate = 25%;Selling and marketing expenses = $160,000;General and administrative expenses = $200,000;Gross profit = $550,000;Depreciation = $30,000; andCost of goods sold = $400,000.
Use the following information to construct an income statement. Sales ............... $1,230,000 Cost of goods sold Gross profit General and administrative expense Selling and marketing expense Depreciation ............ $25,000 Operating income Interest ..............$141,000 Income before
Use your knowledge of income statements and common-size statements to fill in the missing dollar amounts.
Use a spreadsheet to construct a common-size balance sheet from the data in problem 2 and a common-size income statement from the data in problem 5.
Use the following income statement and balance sheet information to put together a statement of cash flows.
Using the financial statements below for the Global Manufacturing corporation,a. Compute common-size financial statements. b. Put together a statement of cash flows of the firm. Where did the firm invest funds during the year? How did it finance these purchases?
Compare and contrast the two common-size balance sheets below. Which one do you think may belong to an auto manufacturer? To a computer manufacturer?
Compare and contrast the two common-size balance sheets below. Which one do you think may belong to a supermarket? To a jeweler?
Using the financial statements in the text:a. Compute common-size financial statements. b. Compute year-to-year percentage changes in the various accounts.c. What insights about the firm can you obtain from this analysis?
What is ratio analysis? Also briefly describe the three basic categories or ways that ratio analysis is used.
What do financial leverage ratios indicate? Identify some measures of financial leverage.
Describe the Du Pont method or system of ratio analysis. What are the two major components of the system?
How is the process of financial planning used to estimate asset investment requirements?
Explain how financial planning is used to determine a firm’s external financing requirements.
What is cost-volume-profit analysis? How can it be used by a firm?
What will happen to the break-even point if the contribution margin rises (falls)?
Describe what would happen to the DOL if all costs are fixed? Variable?
The Robinson Company has current assets and current liabilities for the two years listed in the text. a. Compare the current ratios between the two years. b. Compare the acid-test ratios between 2014 and 2015. Comment on your findings.
The Robinson Company had a cost of goods sold of $1,000,000 in 2014 and $1,200,000 in 2015. a. Calculate the inventory turnover for each year. Comment on your findings. b. What would have been the amount of inventories in 2015 if the 2014 turnover ratio had been maintained?
The Dayco Manufacturing Company had the following financial statement results for last year. Net sales were $1.2 million with net income of $90,000. Total assets at year end amounted to $900,000. a. Calculate Dayco’s asset turnover ratio and its profit margin. b. Show how the two ratios in Part
Next year, All greens expects its sales to reach $33,000 with an investment in total assets of $10,750. Net income of $1,225 is anticipated. This year, sales were $30,000, total assets were $9,900, and net income was $1,000. Last year, these figures were $28,000, $9,000, and $750 respectively.a.
Selected financial data in thousands of dollars for the Hunter Corporation are listed in the text. a. Calculate Hunter’s rate of return on total assets in 2015 and in 2014. Did the ratio improve or worsen? b. Diagram the expanded Du Pont system for Hunter for 2015. Insert the appropriate dollar
Financial statements for the Genatron Manufacturing Corporation for 2015 and 2014 are shown in the text. a. Apply Du Pont analysis to both the 2015 and 2014 financial statements’ data. b. Explain how financial performance differed between 2015 and 2014.
This problem uses the financial statements for the Genatron Manufacturing Corporation for the years 2015 and 2014 from Problem 6. a. Calculate Genatron’s dollar amount of net working capital in each year. b. Calculate the current ratio and the acid-test ratio in each year. c. Calculate the
Genatron Manufacturing expects its sales to increase by 10 percent in 2016. Estimate the firm’s external financing needs by using the percent-of-sales method for the 2015 data. Assume that no excess capacity exists and that one-half of the 2015 net income will be retained in the business.
Rework Problem 8 assuming that Genatron Manufacturing expects its sales to increase by 20 percent in 2013. What is the amount of external financing needed?
Genatron wants to estimate what will happen to its income before interest and taxes if its net sales change from the 2015 level of $1,500,000. Refer to Genatron’s 2015 income statement, shown in Problem 6, where the income before interest and taxes is $247,000 (EBT of $190,000 plus Interest of
Challenge Problem. Using the information in Tables, compute the financial ratios we discussed in this chapter for Walgreens using the 2010 and 2009 data.
Challenge Problem. Below are financial statements for Global Manufacturing. After computing the ratios we discussed in this chapter, discuss strong and weak points of Global’s performance.
Following are the consolidated financial statements for Global Manufacturing’s industry. Use Du Pont analysis on the industry financial statements to determine why industry return on equity changed from year to year.
Compare the reasons for the changes in return on equity for Global Manufacturing and its industry.
Challenge Problem. Compute the financial ratios for Global Manufacturing’s industry. Using Global’s ratios from problem 12, graph the firm’s and industry ratios as we’ve done in this chapter. Analyze Global’s performance in comparison to its industry.
Challenge Problem. Evaluate the performance of Johnson and Johnson in comparison to its industry
Associated Containers Company is planning to manufacture and sell plastic pencil holders. Direct labor and raw materials will be $2.28 per unit. Fixed costs are $15,300 and the expected selling price is $3.49 per unit. a. Determine the break-even point (where operating profit is zero) in units and
Challenge Problem. Graph the revenue and cost lines to estimate the break-even point for the following data. Compute the break-even point mathematically. a. price = $12.95; variable cost/unit = $6.89; fixed costs = $10,000 b. price = $23, 995; variable cost/unit = $16,545; fixed costs = $40
This problem uses the two years of financial statements data provided in Problem 6 for the Genatron Manufacturing Corporation.a. Calculate and compare each current assets account as a percentage of total assets for that year.b. Calculate and compare each current liabilities account as a percentage
The Jackman Company had sales of $1,000,000 and net income of $50,000 last year. Sales are expected to increase by 20 percent next year. Selected year-end balance sheet items were: Current assets = $400,000; Fixed assets = $500,000; Total assets = $900,000; Current liabilities = $200,000;
Using the data in the chapter, estimate Walgreen’s external financing needs if a 20-percent growth rate is expected. 1. Forecast the dollar amount of the expected sales increase: 2. Determine the dollar amount of new asset investment necessary to support the sales increase. 3. Compute the
Using Global Manufacturing’s financial statements in problem 12, estimate their external financing needs if 10-percent growth in sales is expected and the firm pays out half of its earnings as dividends.1. Forecast the dollar amount of expected sales increase2. Determine the dollar amount of new
Using the financial statements presented in problem 12, determine Global Manufacturing’s degree of operating leverage in each of the years presented. Assume the cost of goods sold are variable costs and all other costs are fixed.
Using your estimate for the degree of operating leverage for Global in 2015, estimate the level of operating income if the following year’s sales a) rise by 5 percent; b) fall by 12 percent.
Using the financial statements presented in problem 6, determine Genatron’s degree of operating leverage in each of the years presented. Assume the cost of goods sold and marketing expenses are variable costs and all other costs are fixed.
Using your estimate for the degree of operating leverage for Genatron in 2015, estimate the level of operating income if the following year’s sales a) rise by 5 percent; b) fall by 12 percent.
Briefly describe a manufacturing firm’s operating cycle.
What is a cash budget? How does the treasurer use forecasts of cash surpluses and cash deficits?
How does the choice of level or seasonal production affect a firm’s cash over the course of a year?
Describe what happens to a firm’s current asset accounts if the firm has seasonal sales and they use. (a) Level production. (b) Seasonal production.
Describe the four motives or reasons for holding cash.
Identify and briefly describe several financial instruments that are used as marketable securities.
Why would a corporation want to invest excess cash in securities issued by a municipality?
What are the three main concerns of a treasurer when investing a firm’s excess cash?
Why is a short-term investment policy statement necessary?
What is float? Why is it important to cash management?
What are the three components of float? Which are under the control of the firm seeking to reduce collection float?
What are some strategies a firm can use to speed up its collections by reducing float?
How can processing float be reduced?
How can a firm use float to slow down its disbursements?
Why can’t a firm that wants to increase disbursement float simply make payments after the stated due date?
How does remote capture reduce float?
Besides lower expenses, explain another advantage of using electronic payments rather than paper checks.
What is credit analysis? Identify the five C’s of credit analysis.
Describe various credit-reporting agencies that provide information on business credit applicants.
How can a firm control the risk of changing exchange rates when billing an overseas customer?
What risks arise when a firm lowers its credit standards to try to increase sales volume?
How do credit terms and collection efforts affect the investment in accounts receivable?
How is the financial manager involved in the management of inventories?
What is JIT II?
How is technology affecting cash management? Order processing?
How is technology changing inventory management?
Pretty Lady Cosmetic Products has an average production process time of 40 days. Finished goods are kept on hand for an average of 15 days before they are sold. Accounts receivable are outstanding an average of 35 days, and the firm receives 40-days credit on its purchases from suppliers. a.

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Introduction to Finance Markets Investments and Financial Management 15th edition Melicher Ronald, Norton Edgar - Solutions

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