Do part a & b

Mini Case This Mini Case is available in MyFinanceLab. After graduating from college in December 2014, Elizabeth Arce started her career at the W&T Corporation, a small-to medium-sized warehouse distributor in Nashville, Tennessee. The company was founded by David Winston and Colin Tabor in 2000, after they had worked together in management at Wal-Mart. Although Arce had an offer from Sam's Club, she became excited about the opportunity with W&T. Win- ston and Tabor, as CEO and VP-marketing, respectively, assured her that she would be given every opportunity to take a leadership role in the business as quickly as she was prepared for the role. In addition to receiving a competitive salary, Arce will immediately be entitled to a bonus based on how well the company does financially. The bonus is determined by the amount of Economic Value Added (EVA) that is generated in a year. To begin, she will receive 1 percent of the firm's EVA each year, to be paid half in stock and half in cash. In any year that the EVA is negative, she will not receive a bonus. Also, the firm's stock is traded publicly on the NYSE MKT, a stock exchange for small-cap companies. The year of 2014 turned out to be a good year financially for the business. But in the ensuing year, 2015, the company experienced a 5.3 percent sales reduction, where sales declined from $5.7 million to $5.4 million. The downturn then led to other financial problems, including a 50 percent reduction in the company's stock price. The share price went from $36 per share at the end of 2014 to $18 per share at the conclusion of 2015! Financial information for W&T for both years is shown on the next page, where all the numbers, except for per share data, are shown in $ thousands. a. Using what you have learned in this chapter and Chapter 3, prepare a financial analysis of W&T, comparing the firm's financial performance between the 2 years. In addition to the financial information provided on the next page, the company's chief financial officer, Mike Stegemoller, has estimated the company's average cost of capital for all its financing to be 10.5 percent. b. What conclusions can you make from your analysis? c. How much will Arce's bonus be in 2014 and 2015, in the form of both cash and stock? How many shares of the stock will Arce receive? d. What recommendations would you make to management? 2015 $ 5.400 3.600 5 1.800 W&T Corporation Income Statement in thousands) Sales 2014 $ 5.700 Cost of goods sold 3.700 Gross profits $ 2.000 Operating expenses Selling and G&A expenses $ 820 Depreciation expense 340 Total operating expenses $0.160 Operating profits $ 840 Interest expense 1200 Earnings before mes taxable income $ 500 Income taxes Net income Additional information Number of common shares outstanding 150 Dividends paid to stockholders $ 120 Market price per share $ 35 $ 780 15001 $(1280) $ 520 1275 $245 $180 150 $ 120 $ 18 W&T Corporation Balance Sheet 2014 2015 $ 300 700 500 125 $1.725 $4.650 Assets Cash Accounts receivable Inventories Other current assets Total current assets Gross fixed assets Accumulated depreciation Metod assets Total assets Labis Debit and Equity Accounts payable Short-term notes payable Total current liabilities Long-term debit $ 495 915 780 160 $2.350 $4,950 12200 $2.750 35100 $27 500 250 5 50 12 $1.960 5540 300 $.940 $2,265 Coman outy Common stock 51.100 16TS 52275 SES SL.100 175 32.835 Totalcommon equity Total tables and equity 100