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FINANCIAL STATEMENTS, Tootsie Roll (in $000s) BALANCE SHEET, as of year-end ASSETS Cash and marketable securities Accounts receivable Inventory Prepaid expenses Deferred taxes Total Current assets Plant & equipment, gross Accumulated depreciation Net fixed assets Intangible and other assets Total assets LIABILITIES AND EQUITIES Accounts payable Dividends payable Accruals Other current liabilities Total Current liabilities Deferred taxes Other liabilities Total liabilities Common stock (60,380,000 shares) Capital in excess of par Retained earnings Treasury stock and other Total equity Total liabilities and Equity 2014 INCOME STATEMENT $121,855 45,337 61,856 5,581 5,482 $240,111 $476,535 (279,619) $196,916 451,382 $888,409 $9,153 4,742 45,580 646 $60,121 $54,939 93,044 $208,104 $41,157 572,669 73,109 ($6,630) $680,305 $888,409 Total revenue Cost of goods sold Gross profit Admin and selling exp Other operating income(exp) Total operating exp EBIT Interest expense Other income(exp) Before-tax earnings Taxes Net income 2014 $543,383 351,897 $191,486 $119,133 0 $119,133 $72,353 21 12,151 $84,483 23,634 $60,849 EPS (60,380,000 shares) $1.01 Average stock price, 2014 $30.65 FINANCIAL STATEMENTS, Hershey's (in $000s) BALANCE SHEET, as of year-end ASSETS Cash and marketable securities Accounts receivable Inventory Prepaid expenses Deferred taxes Total Current assets Net fixed assets Intangible and other assets Total assets LIABILITIES AND EQUITIES Accounts payable Accruals ST & current portion of LT Debt Total Current liabilities Long-term debt Other liabilities Total liabilities Common stock (220,870,000 shs) Capital in excess of par Retained earnings Treasury stock and other Total equity Total liabilities and equity 2014 INCOME STATEMENT $1,118,508 477,912 659,541 178,862 52,511 $2,487,334 $1,805,345 1,064,809 $5,357,488 Net sales Cost of goods sold Gross profit Admin and selling exp Impairment charges EBIT Interest income(expense) Before-tax earnings Taxes Net income 2014 $7,146,079 3,865,231 $3,280,848 $1,922,508 18,665 $1,339,675 ($88,356) $1,251,319 430,849 $820,470 EPS (220,870,000 shares) $461,514 779,633 166,875 $1,408,022 $1,795,142 538,272 $3,741,436 $359,901 664,944 5,454,286 ($4,863,079) $1,616,052 $5,357,488 $3.71 Average stock price, 2014 $98.94 a. Which firm is the most liquid? Why? (Justify your answer with at least two ratios). b. Which firm is the most profitable? Why? (Justify your answer with at least two ratios). Page 1 c. Construct a Du Pont equation (use the extended, or modified version shown in the Week 1, chapters 2 & 3 lesson notes) for each firm and comment on the sources of each firm's ROE as revealed by the equation. Best Buy has a 65\" 4K Ultra HD TV on sale for $1,999.99. If you could borrow that amount from First National Bank of St Louis at 4% for 1 year, what would be your monthly loan payments? You have figured out that you will need $800,000 to finance your child's college education when she turns 18, which will be 16 years from now, so you decide to invest in zero-coupon bonds, which will mature in 16 years and will pay off $800,000 at maturity. How much would you have to invest in zero-coupon bonds today to reach your goal, assuming the going rate on such bonds is currently 3.5% per year? You hold a portfolio of stocks consisting of the following: Stock Caterpillar CitiCorp Wendy's Boeing... Beta 0.6 0.8 1.0 1.2 Total: Current Value $20,000 $21,000 $22,000 $27,000 $90,000 a. What is the beta of the portfolio? b. You have decided to sell Boeing for $27,000 and to use the proceeds to buy $27,000 of Nike stock with a beta of 1.4. After the transaction is complete, what will be the new beta of the portfolio? (Disregard any commissions on the buy and sell transactions.) c. If the risk-free rate is 1% and the expected rate of return on the stock market is 9%, what is the required rate of return per the CAPM for a stock that has a beta of 1.3? Page 2 a. Curley's Company's bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 4%. The bonds have a yield to maturity (YTM) of 5%. Given these conditions, what should be the current price of these bonds? b. Larry's Company's bonds have 8 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 4%. The bonds have a current market price of $890. Given these conditions, what should be the yield to maturity (YTM) of these bonds? Page 3