For the remaining questions in this assignment, base your answers on the following information

for Joe?s Fly-By- Night Oil Company, whose latest income statement and balance sheet are

shown below.

Joe's Fly-by- Night Oil

INCOME STATEMENT, 2013BALANCE SHEET, as of Dec 31, 2013

Sales $10,000 ASSETS

Cost of goods sold 4,000 Cash$5,000

Gross profit $6,000 Accounts receivable 3,000

S, G & A expenses 3,000 Inventory 17,000

EBIT $3,000 Current assets $25,000

Interest $200 Equipment (gross )27,000

Before-tax earnings $2,800 Less Accum Depreciation (12,000)

Taxes 1,000 Equipment (net) $15,000

Net income $1,800 Total assets $40,000

EPS $1.80 Accounts payable $17,000

Dividends $600 Long-term debt $3,000

Addition to retained earnings $1,200 Total liabilities $20,000

LIABILITIES AND EQUITY

Current liabilities $17,000

Common stock (1,000 shares) $7,000

Retained earnings $13,000

Total equity $20,000

Total liabilities & Equity $40,000

Stock price on Dec 31, 2012? $50.00

Number of common shares outstanding on Dec 31, 2012...1,000

11. What was Joe?s average, or effective tax rate in 2013?

12. What was Joe?s NOPAT in 2013?

13. What was Joe?s Free Cash Flow (FCF) in 2013?

14. Suppose you were an investor and you were considering whether to buy a corporate bond

from Joe?s Corporation or a Municipal Bond from the city of St. Louis. Joe?s corporate bond has

a yield of 8%. The St Louis city bond has a yield of 6%. The income from Joe?s bond is taxable.

The income from the St Louis city bond is tax-free. If your effective tax rate is 20%, which bond

would give you the higher after-tax yield?

15. What was Joe?s Net Worth at the end of 2013?

Chapter 3:

17. Calculate Joe?s ROE for 2013. Then construct a Du Pont equation (use the extended, or

modified version shown in the Week 1, chapters 2 & 3 lesson notes) and comment on the sources

of Joe?s ROE as revealed by the extended Du Pont equation.

FINC 5000 Homework Assignment for Week 1: Each week you will have a set of homework problems to complete. They are due by the following Sunday night at 11:59 pm, US central time. For Week 1, please turn in the answers to the following questions: Chapter 1: 1. Describe the field of finance. How is it different from the field of accounting? 2. What are the three forms of business generally encountered in the US? What are the main defining characteristics of each? 3. What should be the basic financial goal of a business? 4. In the context of a corporation seeking to maximize the wealth of its owners, how is \"wealth\" defined? 5. What are the three broad factors that influence the market price of a corporation's stock? 6. Name three ways in which businesses can raise money from external sources when they need it for expansion or project funding. Chapter 2: 7. What is the purpose of a balance sheet? What are some examples of typical balance sheet accounts? 8. What is the purpose of an income statement? What are some examples of typical income statement accounts? 9. What is the purpose of a statement of cash flows? What are some examples of typical statement of cash flow accounts? 10. a. What are \"Free Cash Flows (FCF)?\" b. What is \"NOPAT?\" For the remaining questions in this assignment, base your answers on the following information for Joe's Fly-By-Night Oil Company, whose latest income statement and balance sheet are shown below. Stock price on Dec 31, 2014...$60.00 Number of common shares outstanding on Dec 31, 2014...1,000 11. What was Joe's average, or effective tax rate in 2014? 12. What was Joe's NOPAT in 2014? 13. What was Joe's Free Cash Flow (FCF) in 2014? (Note: For this question, assume Joe obtained no new plant and equipment or additional net working capital in 2014. Thus his Net Investment in Operating Capital (NIOC) for 2014 is $0.00.) 14. Suppose you were an investor and you were considering whether to buy a corporate bond from Joe's Corporation or a Municipal Bond from the city of St. Louis. Joe's corporate bond has a yield of 6%. The St Louis city bond has a yield of 4%. The income from Joe's bond is taxable. The income from the St Louis city bond is tax-free. If your effective tax rate is 36%, which bond would give you the higher after-tax yield? 15. What was Joe's Net Worth at the end of 2014? 16. Why is the market value of a firm's stock almost always higher than the book value of the firm's stock as shown on the balance sheet? Chapter 3: 17. a. Calculate Joe's ROE for 2014. b Construct a Du Pont equation (use the extended, or modified version shown in the Week 1, chapters 2 & 3 lesson notes) and comment on the sources of Joe's ROE as revealed by the equation. End of Assignment Questions Notes: - Assignments that are submitted after the deadline will be assessed a late penalty unless it has been cleared with your instructor beforehand or the situation was beyond your control. Contact your instructor ASAP if it appears you are going to submit an assignment late. - Please put all the questions and problems in one file before you submit the assignment for grading. Do not do the questions in Word and the problems in Excel and submit two files, for example. It is too hard for your instructor to keep track of the files when more than one is submitted. - If your answer to a homework problem involves mathematical calculations, please show the calculations. If you are doing the assignment in Excel no extra effort is required because your instructor can see the formulas you used, but if you are doing the assignment in Word you should write out the calculations manually. Showing your calculations is necessary in order for your instructor to give you any partial credit if you make a mistake and come up with the wrong answer. Answers to numerical problems: Question 11: 36.8% Question 12: $1,263 Question 13: $1,263 Question 14: After-tax yield on corporate bond = 3.8% Question 15: $21,000 Question 17a: 5.7% Question 17b: Net profit margin = 12%, total asset turnover = .23, equity multiplier = 2.05