31 Dec Directions: Answer the following

FIN534 Week 2 Homework Assignment Set 1

FIN 534 – Homework Set #1

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 4:

Assume that you recently graduated and have just reported to work as an investment advisor at the one of the firms on Wall Street. You have been presented and asked to review the following Income

Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer.

Income Statements and Balance Sheet

Balance Sheet 2012 2013 2014

Cash $9,000 $7,282 $14,000

Short-term investments 48,600 20,000 71,632

Accounts receivable 351,200 632,160 878,000

Inventories 715,200 1,287,360 1,716,480

Total current assets $1,124,000 $1,946,802 $2,680,112

Gross fixed assets 491,000 1,202,950 1,220,000

Less: Accumulated depreciation 146,200 263,160 383,160

Net fixed assets $344,800 $939,790 $836,840

Total assets $1,468,800 $2,886,592 $3,516,952

Liabilities and Equity

Accounts payable $145,600 $324,000 $359,800

Notes payable 200,000 720,000 300,000

Accruals 136,000 284,960 380,000

Total current liabilities $481,600 $1,328,960 $1,039,800

Long-term debt 323,432 1,000,000 500,000

Common stock (100,000 460,000 460,000 1,680,936

shares)

Retained earnings 203,768 97,632 296,216

Total equity $663,768 $557,632 $1,977,152

Total liabilities and equity $1,468,800 $2,886,592 $3,516,952

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FIN 534 Homework Set #1 1156 (5-19-2015) Page 1 of 3

FIN 534 – Homework Set #1

Income Statements 2012 2013 2014

Sales $3,432,000 $5,834,400 $7,035,600

Cost of goods sold except depr. 2,864,000 4,980,000 5,800,000

Depreciation and amortization 18,900 116,960 120,000

Other expenses 340,000 720,000 612,960

Total operating costs $3,222,900 $5,816,960 $6,532,960

EBIT $209,100 $17,440 $502,640

Interest expense 62,500 176,000 80,000

EBT $146,600 ($158,560) $422,640

Taxes (40%) 58,640 -63,424 169,056

Net income $87,960 ($95,136) $253,584

Other Data 2012 2013 2014

Stock price $8.50 $6.00 $12.17

Shares outstanding 100,000 100,000 250,000

EPS $0.88 ($0.95) $1.104

DPS $0.22 0.11 0.22

Tax rate 40% 40% 40%

Book value per share $6.64 $5.58 $7.909

Lease payments $40,000 $40,000 $40,000

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FIN 534 Homework Set #1 1156 (5-19-2015) Page 2 of 3

FIN 534 – Homework Set #1

Ratio Analysis 2012 2013 Industry

Average

Current 2.3 1.5 2.7

Quick 0.8 0.5 1.0

Inventory turnover 4 4 6.1

Days sales outstanding 37.3 39.6 32.0

Fixed assets turnover 10 6.2 7.0

Total assets turnover 2.3 2 2.5

Debt ratio 35.60% 59.60% 32.0%

Liabilities-to-assets ratio 54.80% 80.70% 50.0%

TIE 3.3 0.1 6.2

EBITDA coverage 2.6 0.8 8.0

Profit margin 2.60% ?1.6% 3.6%

Basic earning power 14.20% 0.60% 17.8%

ROA 6.00% ?3.3% 9.0%

ROE 13.30% ?17.1% 17.9%

Price/Earnings (P/E) 9.7 ?6.3 16.2

Price/Cash flow 8 27.5 7.6

Market/Book 1.3 1.1 2.9

1. What is the free cash flow for 2014?

2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?

3. Calculate the 2014 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity position in 2013?

4. Use the extended DuPont equation to provide a summary and overview of company’s financial condition as projected for 2014. What are the firm’s major strengths and weaknesses?

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FIN 534 Homework Set #1 1156 (5-19-2015) Page

FIN534 Week 4 Homework Assignment Set 2

FIN 534 – Homework Set #2

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Assume that you are nearing graduation and have applied for a job with a local bank. The bank’s evaluation process requires you to take an examination that covers several financial analysis techniques.

Use the following information for Questions 1 through 2:

5. What is the present value of the following uneven cash flow stream ?$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.

6. Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later?

Use the following information for Questions 3 and 4:

A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is 10%.

3. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you about the relationship between rd and the bond’s coupon rate?

4. What are the total return, the current yield, and the capital gains yield for the discount bond in Question #3 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does not default on the bond.)

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FIN 534 Homework Set #2 1156 (7-21-15) Page

FIN534 Week 6 Homework Assignment Set 3

FIN 534 – Homework Set #3

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for questions 1 through 4:

The Goodman Industries’ and Landry Incorporated’s stock prices and dividends, along with the Market

Index, are shown below. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends.

Goodman Industries Landry Incorporated Market Index

Year Stock Price Dividend Stock Price Dividend Includes Dividends

2013 $25.88 $1.73 $73.13 $4.50 17495.97

2012 22.13 1.59 78.45 4.35 13178.55

2011 24.75 1.50 73.13 4.13 13019.97

2010 16.13 1.43 85.88 3.75 9651.05

2009 17.06 1.35 90.00 3.38 8403.42

2008 11.44 1.28 83.63 3.00 7058.96

1. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average annual returns for the two stocks and the index. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and then dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2008 because you do not have 2007 data.)

2. Calculate the standard deviations of the returns for Goodman, Landry, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.)

3. What dividends do you expect for Goodman Industries stock over the next 3 years if you expect the dividend to grow at the rate of 5% per year for the next 3 years? In other words, calculate D1, D2, and D3. Note that D0 = $1.50.

4. Assume that Goodman Industries’ stock has a required return of 13%. You will use this required return rate to discount the dividends calculated earlier. If you plan to buy the stock, hold it for 3 years, and then sell it for $27.05, what is the most you should pay for it?

FIN534 Week 8 Homework Assignment Set 4

FIN 534 – Homework Set #4

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 3:

Assume you are presented with the following mutually exclusive investments whose expected net cash flows are as follows:

EXPECTED NET CASH FLOWS:

Year Project A Project B

0 ?$400 ?$650

1 ?528 210

2 ?219 210

3 ?150 210

4 1,100 210

5 820 210

6 990 210

7 ?325 210

1. (a) What is each project’s IRR?

(b) If each project’s cost of capital were 10%, which project, if either, should be selected? If the cost of capital were 17%, what would be the proper choice?

2. (a) What is each project’s MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7 as the end of Project B’s life.)

3. What is the crossover rate, and what is its significance?

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FIN 534 Homework Set #4 1156 (5-19-2015) Page 1 of 2

FIN 534 – Homework Set #4

Use the following information for Question 4:

The staff of Porter Manufacturing has estimated the following net after-tax cash flows and probabilities for a new manufacturing process:

Line 0 gives the cost of the process, Lines 1 through 5 give operating cash flows, and Line 5* contains the estimated salvage values. Porter’s cost of capital for an average-risk project is 10%.

Net After-Tax Cash Flows

Year P = 0.2 P = 0.6 P = 0.2

0 ?$100,000 ?$100,000 ?$100,000

1 20,000 30,000 40,000

2 20,000 30,000 40,000

3 20,000 30,000 40,000

4 20,000 30,000 40,000

5 20,000 30,000 40,000

5* 0 20,000 30,000

4. Assume that the project has average risk. Find the project’s expected NPV. (Hint: Use expected values for the net cash flow in each year.)

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FIN 534 Homework Set #3 1158 (8-14-2015) Page 1 of 1

FIN534 Week 9 Assignment 1 Financial Research Report

Students, please view the “Submit a Clickable Rubric Assignment” in the Student Center.

Instructors, training on how to grade is within the Instructor Center.

Assignment 1: Financial Research Report

Due Week 9 and worth 300 points

Imagine that you are a financial manager researching investments for your client. Use the Strayer Learning Resource Center to research the stock of any U.S. publicly traded company that you may consider as an investment opportunity for your client. Your investment should align with your client’s investment goals. (Note: Please ensure that you are able to find enough information about this company in order to complete this assignment. You will create an appendix, in which you will insert related information.)

The assignment covers the following topics:

Rationale for choosing the company for which to invest

Ratio analysis

Stock price analysis

Recommendations

Refer to the following resources to assist with completing your assignment:

Stock Selection

Forbes – “Six Rules to Follow When Picking Stocks”

CNN Money – “Stocks: Investing in stocks”

The Motley Fool – “13 Steps to Investing Foolishly”

Seeking Alpha – “The Graham And Dodd Method For Valuing Stocks”

Investopedia – “Guide to Stock-Picking Strategies”

Seeking Alpha – “Get Your Smart Beta Here! Dividend Growth Stocks As ‘Strategic Beta’ Investments”

Market and Company Information

U.S. Securities and Exchange Commission – “Market Structure”

Yahoo! Finance

Mergent Online (Note: This resource is also available through the Strayer Learning Resource Center.)

Seeking Alpha (Note: Also available through the Android or iTunes App store.)

Morningstar (Note: You can create a no-cost Basic Access account.)

Research Hub, located in the left menu of your course in Blackboard.

Write a ten to fifteen (10-15) page paper in which you:

Provide a rationale for the stock that you selected, indicating the significant economic, financial, and other factors that led you to consider this stock.

Suggest the primary reasons why the selected stock is a suitable investment for your client. Include a description of your client’s profile.

Select any five (5) financial ratios that you have learned about in the text. Analyze the past three (3) years of the selected financial ratios for the company; you may obtain this information from the company’s financial statements. Determine the company’s financial health. (Note: Suggested ratios include, but are not limited to, current ratio, quick ratio, earnings per share, and price earnings ratio.)

Based on your financial review, determine the risk level of the stock from your investor’s point of view. Indicate key strategies that you may use in order to minimize these perceived risks.

Provide your recommendations of this stock as an investment opportunity. Support your rationale with resources, such as peer-reviewed articles, material from the Strayer Learning Resource Center, and reviews by market analysts.

Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and other similar websites do not qualify as academic resources.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

Critique financial management strategies that support business operations in various market environments.

Analyze financial statements for key ratios, cash flow positions, and taxation effects.

Review fixed income strategies using time value of money concept, bond valuation methods, and interest rate calculations.

Estimate the risk and return on financial investments.

Apply financial management options to corporate finance.

Determine the cost of capital and how to maximize returns.

Formulate cash flow analysis for capital projects including project risks and returns.

Evaluate how corporate valuation and forecasting affect financial management.

Analyze how capital structure decision-making practices impact financial management.

Use technology and information resources to research issues in financial management.

Write clearly and concisely about financial management using proper writing mechanics.

FIN534 Week 10 Homework Assignment Set 5

FIN 534 – Homework Set #5

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 and 2:

Boehm Corporation has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2014 earnings are expected to jump to $12.6 million, and Boehm plans to invest $7.3 million in a plant expansion. This one-time unusual earnings growth won’t be maintained, though, and after 2014 Boehm will return to its previous 8% earnings growth rate. Its target debt ratio is 35%.

Calculate Boehm’s total dividends for 2014 under each of the following policies:

1. (a) Its 2014 dividend payment is set to force dividends to grow at the long-run growth rate in earnings.

(b) It continues the 2013 dividend payout ratio.

2. (a) It uses a pure residual policy with all distributions in the form of dividends (35% of the $7.3 million investment is financed with debt).

(b) It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy.

Use the following information for Questions 3 and 4:

Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm’s fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm’s assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $10,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. The firm has tax loss

carryforwards that render its tax rate zero, its cost of equity is 16%, and it uses no debt.

3. What is the incremental profit? To get a rough idea of the project’s profitability, what is the project’s expected rate of return for the next year (defined as the incremental profit divided by the investment)? Should the firm make the investment? Why or why not?

4. Would the firm’s break-even point increase or decrease if it made the change?

© 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.

FIN 534 Homework Set #5 1156 (5-19-2015) Page 1 of 1