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 Current assets 195 71 Liabilities Current liabilities 180 Accounts payable 127.2 Notes payable/short-term debt 90 3972 Total current liabilities 82 21 142 Cash Accounts receivable Inventories Total current assets 18 110 447 103 89 485 365 Long-term assets Net property, plant and equipment Total long-term assets Long-term liabilities Long-term debt Total long-term liabilities 361.2 465 465 361.2 485 365 Total liabilities 568 450.2 324 280 Shareholders' equity Common stock Retained earnings Total shareholders' equity 40 32 364 312 Total assets 932 762.2 932 762.2 Total liabilities and shareholders' equity Income Statement Alpha Corporation 2019 932 -620 312 2018 902 -610 292 -64 -62 -25 -22 -22 -18 Total sales Cost of sales Gross Profit Selling, general and administrative expenses Research and development Depreciation and amortization Operating income Other income Earnings before interest and taxes (EBIT) Interest income (expense) Pretax income Taxes Net income 201 190 201 190 -30 171 -18 153 -25 165 -16 149 (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 2019 Operating activities 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 (6) 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. (i) 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.) (iii) 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. (u) 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 Current assets 195 71 Liabilities Current liabilities 180 Accounts payable 127.2 Notes payable/short-term debt 90 3972 Total current liabilities 82 21 142 Cash Accounts receivable Inventories Total current assets 18 110 447 103 89 485 365 Long-term assets Net property, plant and equipment Total long-term assets Long-term liabilities Long-term debt Total long-term liabilities 361.2 465 465 361.2 485 365 Total liabilities 568 450.2 324 280 Shareholders' equity Common stock Retained earnings Total shareholders' equity 40 32 364 312 Total assets 932 762.2 932 762.2 Total liabilities and shareholders' equity Income Statement Alpha Corporation 2019 932 -620 312 2018 902 -610 292 -64 -62 -25 -22 -22 -18 Total sales Cost of sales Gross Profit Selling, general and administrative expenses Research and development Depreciation and amortization Operating income Other income Earnings before interest and taxes (EBIT) Interest income (expense) Pretax income Taxes Net income 201 190 201 190 -30 171 -18 153 -25 165 -16 149 (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 2019 Operating activities 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 (6) 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. (i) 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.) (iii) 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. (u) 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