1. 50 POINTS Assume that Alpha Corporation is listed on the NYSE and has 25 million shares out- standing in 2019 with a price of $94 per share, up from $88 in 2018. The earnings growth is expected to be 15% The balance sheet and income statement of Alpha Corporation are given below. (All values are in millions of dollars.) Refer to these financial statements for the following questions. Balance sheet Alpha Corporation 2019 2018 2019 2018 Assets Liabilities Current assets Current liabilities Cash 195 180 Accounts payable 82 71 Accounts receivable 142 127.2 Notes payable/short-term debt 21 18 Inventories 110 90 Total current assets 447 397.2 Total current liabilities 103 89 Long-term assets Long-term liabilities Net property, plant 485 365 Long-term debt 465 361.2 and equipment Total long-term liabilities 465 361.2 Total long-term assets 485 365 Total liabilities 568 450.2 Shareholders' equity Common stock 324 280 Retained earnings 40 32 Total shareholders' equity 364 312 Total assets 932 762.2 Total liabilities and 932 762.2 shareholders' equity Income Statement Alpha Corporation 2019 2018 Total sales 932 902 Cost of sales -620 -610 Gross Profit 312 292 Selling, general and administrative expenses -64 -62 Research and development -25 -22 -22 -18 Depreciation and amortization Operating income 201 190 Other income 201 190 Earnings before interest and taxes (EBIT) Interest income (expense) -30 -25 Pretax income 171 165 Taxes -18 -16 Net income 153 149 (a) Prepare the Statement of Cash Flows (that is, fill in the following table below for 2019 only) for Alpha Corporation knowing that$31 million were paid out in dividends in 2019. (Read carefully section 2.4, pp.35-38.): Statement of Cash Flows Alpha Corporation 2019 Operating activities 2019 Net income Depreciation and amortization Changes in accounts receivable Changes in accounts payable Changes in inventories Total cash flow from operating activities Investment activities Capital expenditures Total Cash flows from investing activities Financing activities Dividends paid Sale or purchase of stock Increase in short term borrowings Increase in long-term borrowings Total cash flows from financing activities Change in cash and cash equivalents (b) Answer the following questions based on the financial statements provided for Alpha Corporation. Write down the formula for each ratio, fill in the numerical value and briefly answer the analysis question. (6) Calculate the market to book ratio for 2019 and 2018. Based on this ratio, how succesful is the firm? Explain briefly. (ii) Calculate the market debt to equity ratio for 2019 and 2018. What does this ratio tell us about the way Alpha Corporation is financed? (Compare the ratios for 2019 and 2018.) (ii) Also, calculate the book debt to equity ratio for 2019 and 2018 Explain the difference between the book debt to equity ratio and market debt to equity ratio ratio. Which of the two is more useful? Why? (iv) Calculate the quick ratio for 2019 and 2018. What can you infer from this ratio? Can the firm meet its short-term liquidity needs? Explain why or why not. (v) Calculate the rate of return on equity, ROE and the rate of return on assets, ROA for 2019 and 2018. Interpret. (vi) Calculate the price to earnings ratio (PE) for 2019 and 2018. What can you infer from this ratio with respect to the market value of Alpha Corporation stock? Explain briefly. 1. 50 POINTS Assume that Alpha Corporation is listed on the NYSE and has 25 million shares out- standing in 2019 with a price of $94 per share, up from $88 in 2018. The earnings growth is expected to be 15% The balance sheet and income statement of Alpha Corporation are given below. (All values are in millions of dollars.) Refer to these financial statements for the following questions. Balance sheet Alpha Corporation 2019 2018 2019 2018 Assets Liabilities Current assets Current liabilities Cash 195 180 Accounts payable 82 71 Accounts receivable 142 127.2 Notes payable/short-term debt 21 18 Inventories 110 90 Total current assets 447 397.2 Total current liabilities 103 89 Long-term assets Long-term liabilities Net property, plant 485 365 Long-term debt 465 361.2 and equipment Total long-term liabilities 465 361.2 Total long-term assets 485 365 Total liabilities 568 450.2 Shareholders' equity Common stock 324 280 Retained earnings 40 32 Total shareholders' equity 364 312 Total assets 932 762.2 Total liabilities and 932 762.2 shareholders' equity Income Statement Alpha Corporation 2019 2018 Total sales 932 902 Cost of sales -620 -610 Gross Profit 312 292 Selling, general and administrative expenses -64 -62 Research and development -25 -22 -22 -18 Depreciation and amortization Operating income 201 190 Other income 201 190 Earnings before interest and taxes (EBIT) Interest income (expense) -30 -25 Pretax income 171 165 Taxes -18 -16 Net income 153 149 (a) Prepare the Statement of Cash Flows (that is, fill in the following table below for 2019 only) for Alpha Corporation knowing that$31 million were paid out in dividends in 2019. (Read carefully section 2.4, pp.35-38.): Statement of Cash Flows Alpha Corporation 2019 Operating activities 2019 Net income Depreciation and amortization Changes in accounts receivable Changes in accounts payable Changes in inventories Total cash flow from operating activities Investment activities Capital expenditures Total Cash flows from investing activities Financing activities Dividends paid Sale or purchase of stock Increase in short term borrowings Increase in long-term borrowings Total cash flows from financing activities Change in cash and cash equivalents (b) Answer the following questions based on the financial statements provided for Alpha Corporation. Write down the formula for each ratio, fill in the numerical value and briefly answer the analysis question. (6) Calculate the market to book ratio for 2019 and 2018. Based on this ratio, how succesful is the firm? Explain briefly. (ii) Calculate the market debt to equity ratio for 2019 and 2018. What does this ratio tell us about the way Alpha Corporation is financed? (Compare the ratios for 2019 and 2018.) (ii) Also, calculate the book debt to equity ratio for 2019 and 2018 Explain the difference between the book debt to equity ratio and market debt to equity ratio ratio. Which of the two is more useful? Why? (iv) Calculate the quick ratio for 2019 and 2018. What can you infer from this ratio? Can the firm meet its short-term liquidity needs? Explain why or why not. (v) Calculate the rate of return on equity, ROE and the rate of return on assets, ROA for 2019 and 2018. Interpret. (vi) Calculate the price to earnings ratio (PE) for 2019 and 2018. What can you infer from this ratio with respect to the market value of Alpha Corporation stock? Explain briefly