1. Hard Rock has the following financial statements: Hard Rock Income Statements For the Years 2016 and 2017 2017 2016 Sales 7,250,000 6.750,000 Cost of Goods Sold 5,400,000 5,330,000 Gross Profit 1,850,000 1,420,000 Selling and G&A 965,000 632,000 Expenses Depreciation 550.000 550,000 EBIT 335,000 238,000 Interest Expense 130000 110,000 Earnings Before Taxes 205,000 128,000 Taxes 71,750 48,900 Net Income 133,250 79,100 Notes: Tax Rate Shares Outstanding stock price Earnings per Share Dividends per Share Addition to RE per Share Dividend Payout Ratio 2017 35% 75.000 80 1.78 0.89 2016 38.2% 65,000 70 1.22 0.73 0.89 0.49 50% 60% Hard Rock Balance Sheet For the Year Ended December 31, 2017 Assets 2017 2016 Cash 149.970 100,000 Accounts Receivable 370,000 347,000 Inventory 870,000 515,000 Total Current Assets 1,389,970 962,000 Plant & Equipment 6,570,000 5,010,000 Accumulated 1.930,000 1,380.000 Depreciation Net Fixed Assets 4,640,000 3,630,000 6,029,970 4,592,000 Total Assets Liabilities and Owners' Equity Accounts Payable Notes Payable Total Current Liabilities Long-term Debt Total Liabilities Common Stock Additional Paid-in-Capital Retained Earnings Total Shareholder's Equity Total Liab. and Owners' Equity 420,000 166,625 586,625 1,350,000 1,936,625 2520000 772000 801345 321,440 22.960 344,400 918,400 1,262,800 2043440 551040 734720 4,093,345 3,329,200 6,029,970 4,592,000 a) Set up a worksheet similar to the financial statements above, and calculate all of the ratios for Hard Rock Corp for 2016 and 2017. b) Verify the change in 2017 Hard Rock Corp's ROE using the Du Pont method and Extended Dupont ROE. c) Using the Altman's model for public firm, calculate the Z-score for Hard Rock Corp. Hint: market value equals number of shares outstanding price per share. d) Calculate Hard Rock Corp.'s economic profit for these years and compare it to net income. Assume that the weighted average cost of capital is 10%. 1. Hard Rock has the following financial statements: Hard Rock Income Statements For the Years 2016 and 2017 2017 2016 Sales 7,250,000 6.750,000 Cost of Goods Sold 5,400,000 5,330,000 Gross Profit 1,850,000 1,420,000 Selling and G&A 965,000 632,000 Expenses Depreciation 550.000 550,000 EBIT 335,000 238,000 Interest Expense 130000 110,000 Earnings Before Taxes 205,000 128,000 Taxes 71,750 48,900 Net Income 133,250 79,100 Notes: Tax Rate Shares Outstanding stock price Earnings per Share Dividends per Share Addition to RE per Share Dividend Payout Ratio 2017 35% 75.000 80 1.78 0.89 2016 38.2% 65,000 70 1.22 0.73 0.89 0.49 50% 60% Hard Rock Balance Sheet For the Year Ended December 31, 2017 Assets 2017 2016 Cash 149.970 100,000 Accounts Receivable 370,000 347,000 Inventory 870,000 515,000 Total Current Assets 1,389,970 962,000 Plant & Equipment 6,570,000 5,010,000 Accumulated 1.930,000 1,380.000 Depreciation Net Fixed Assets 4,640,000 3,630,000 6,029,970 4,592,000 Total Assets Liabilities and Owners' Equity Accounts Payable Notes Payable Total Current Liabilities Long-term Debt Total Liabilities Common Stock Additional Paid-in-Capital Retained Earnings Total Shareholder's Equity Total Liab. and Owners' Equity 420,000 166,625 586,625 1,350,000 1,936,625 2520000 772000 801345 321,440 22.960 344,400 918,400 1,262,800 2043440 551040 734720 4,093,345 3,329,200 6,029,970 4,592,000 a) Set up a worksheet similar to the financial statements above, and calculate all of the ratios for Hard Rock Corp for 2016 and 2017. b) Verify the change in 2017 Hard Rock Corp's ROE using the Du Pont method and Extended Dupont ROE. c) Using the Altman's model for public firm, calculate the Z-score for Hard Rock Corp. Hint: market value equals number of shares outstanding price per share. d) Calculate Hard Rock Corp.'s economic profit for these years and compare it to net income. Assume that the weighted average cost of capital is 10%
