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eBook Calculator Problem 3-26 The Protek Company is a large manufacturer and distributor of electronic components. Because of some successful new products marketed to manufacturers of computers and mobile electronic devises, the firm has recently undergone a period of explosive growth, more than doubling its revenues during the last two years. However, the growth has been accompanied by a marked decline in profitability and a precipitous drop in the company's stock price. You are a financial consultant who has been retained to analyze the company's performance and find out what's going wrong. Your investigative plan Involves conducting a series of in-depth interviews with management and doing some independent research on the industry. However, before starting, you want to focus your thinking to be sure you can ask the right questions. You'll begin by analyzing the firm's financial statements over the last three years, which are shown below. The following additional information is provided with the financial statements. Depreciation for 20x1, 20x2, and 20x3 was $200, $250, and $275 million respectively. No stock was sold or repurchased, and like many fast-growing companies, Protek paid no dividends. Assume the tax rate is a flat 34% and the firm pays 10% interest on its debt. Protek Company Income Statements For the periods ended 12/31 (5000,000) 20x1 20x2 $ 1524 $ 2090 631 906 20x3 $ 3231 1502 $ 893 $ 1184 $ 1729 COGS Gross margin Expenses Marketing $ 316 $ 495 $ 882 Check My Work eBook Calculator Protek Company Income Statements For the periods ended 12/31 ($000,000) 20X1 20x2 20X3 Sales $ 1524 631 $ 2090 906 COGS $ 3231 1502 $ 1729 Gross margin $ 893 $ 1184 Expenses Marketing $ 316 158 126 $ 495 211 R&D $ 882 327 294 $ 1503 179 Administration Total expenses $ 600 $ 885 EBIT 293 $ 299 63 Interest EBT $ 226 143 83 - $ 230 $ 204 28 Tax EAT No 9 For the nerinde anded 12/31 Check My Work All work saved Email Instructor Save and Ex eBook Calculator Protek Company Balance Sheets For the periods ended 12/31 ($000,000) 20x1 2 0x2 ASSETS Cash Accounts receivable 590 300 Inventory Current assets Fixed assets Gross $ 1590 Accumulated depreciation (610) 2388 (860) 1528 $ 2070 Net 980 (1135) 1576 2528 Total assets 1275 Protek Company Balance Sheets For the periods ended 12/31 ($000,000) 20X1 20X2 20x3 LIABILITIES Check My Work All work saved. Email Instructor Save and it may improve the responsiveness of your Mac. eBook Calculator Protek Company Balance Sheets For the periods ended 12/31 ($000,000) 20X1 20x2 20x3 LIABILITIES $ 56 $ Accounts payable Accruals Current liabilities 09 Capital Long-term debt $ 630 $ 1260 $ 1600 Equity 574 709 764 Total liabilities & equity $ 1275 $ 2070 $ 2528 a. Construct common size income statements for 20x1, 20x2, and 20X3. Round your answers to 2 decimal pla 20x1 20x3 20x Sales $ 1524 F COGS 631 41.4 INI all 43.35 $ 3231 1,502 $ 1729 100 46.49 5 3.51 Gross Margin $ 893 Expenses Marketing $ 316 ( 20.73 $ 495 23.68 $ 882 27.30 Check My Work 5 Calculator eBook Expenses Marketing R&D $ 316 158 126 20.73 10.37 8.27 39.37 $ 495 211 179 $ 885 23.68 10.10 8.56 42.34 $ 882 327 294 $ 1503 27.30 10.12 9.10 46.52 Admin Total Expenses $ 600 EBIT $ 293 Interest 63 I EBT 19.23 4.13 15.09 5.12 .97 $ 299 95 $ 204 $ 69 $ 135 $ 230 $ 78 $ 152 14.31 4.55 9.76 3.30 6.46 $ 226 143 $ 83 $ 28 $ 55 4.43 2.57 0.87 1.70 EAT ( 9 b. Construct statements of cash flows for 20x2 and 20X3. Use a minus sign, to indicate any decreases in cash or cash outflows. PROTEK COMPANY Statement of Cash Flows For the years ended 12/31 20x2 and 20x3 (5000,000) OPERATING ACTIVITIES: 20x2 20x3 Net Income 135.00 55 eBook Calculator OPERATING ACTIVITIES: 20x2 135.00 20x3 55 Net Income $ Depreciation 250 $ 275 $ -207 $ -325 Net changes in current accounts Cash from Operating Activities 178 $ INVESTING ACTIVITIES: $ -798 $ ( -323 Increase in Fixed Assets Cash from Investing Activities -798 $ -323 FINANCING ACTIVITIES: Increase in Debt $ 630 V $ 630 $ 340 340 Cash from Financing Activities DOOR NET CASH FLOW $ 10 $ 22 RECONCILIATION Beginning Cash 30 $ T 10 vs Net Cash Flow 22 Ending Cash $ 40 $ 62 C. Calculate the indicated ratios for all three years. Round ACP up to the nearest whole day. Round the other answers to 1 decimal place. PROTEK COMPANY Ratio Analysis 20X1 20X2 20x3 Current Ratio Industry Average 4.5 3.2 42 4.2 5.4 Quick Ratio ACP 61 days 66 days 6 X Inventory Turnover (COGS) 7.5X Fixed Asset Turnover 1.6% Total Asset Turnover 1.2X 42 days 7 x 1.6 X 1.2 X D 2.1 L 1 X 1.3 X All w eavad Email Instructor Save and Exit Submit Assionment for Grad DOOR NET CASH FLOW $ 10 $ 22 RECONCILIATION Beginning Cash 30 $ T 10 vs Net Cash Flow 22 Ending Cash $ 40 $ 62 C. Calculate the indicated ratios for all three years. Round ACP up to the nearest whole day. Round the other answers to 1 decimal place. PROTEK COMPANY Ratio Analysis 20X1 20X2 20x3 Current Ratio Industry Average 4.5 3.2 42 4.2 5.4 Quick Ratio ACP 61 days 66 days 6 X Inventory Turnover (COGS) 7.5X Fixed Asset Turnover 1.6% Total Asset Turnover 1.2X 42 days 7 x 1.6 X 1.2 X D 2.1 L 1 X 1.3 X Check My Work All w eavad Email Instructor Save and Exit Submit Assionment for Grad ng it may improve the responsiveness of your Mac. eBook Calculator un uso Inventory Turnover (COGS) 7.5X Fixed Asset Turnover 1.6X Total Asset Turnover 1.2x 7 X 1.6 x 1.2 x 55 % [ 1.1 1 [ 4. 7x 6 X [ 1.4) x - 1 x. 57 x % C 1.8 1 3.1 X 5 X [ 2.1 x 1.3 X 55 x % ( 2.1 1 1.6 Debt Ratio 53% Debt Equity TIE 4.5x ROS ROA 10.8% I T % % 11.9 26.5 2.2 T / % % ROE 6.5 19.0 2.9 % % 22.8% 2.1 1 2.2 7.20 3.3 Equity Multiplier d. Construct both Du Pont equations for Protek and the industry. Round your answers to 1 decimal place. The Du Pont Equation ROA ROS Total Asset Turnover Industry Protek The Extended Du Pont Equation Check My Work t may improve the responsiveness of your Mac. Calculator eBook Protek The Extended Du Pont Equation ROE * Equity Multiplier Industry Protek e. One hundred million shares of stock have been outstanding for the entire period. The price of Protek stock in 20x1, 20X2, and 20X3 was $33.44, $22.95, and $9.35 respectively. Calculate the firm's Earnings Per Share (EPS) and its Price Earnings Ratio (P/E). Round your answers to 2 decimal places. 20x1 20x2 20X3 # of Shares 100 mil 100 mil 100 mil Earnings (SM) 152 Stock Price $33.44 $22.95 $9.35 135 EPS $ P/E Market to BV Check My Won Partially correct Check My Work All work saved Email Instructor Save and Exit Submit Assignment for Grading