1. SeeTable2.5showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12.3 million at the end of 2013, and this equipment was depreciated by $4.1 million per year in 2014, 2015, and 2016. Given Mydecos tax rate of 35%, what impact would this additional purchase have had on Mydecos net income in years 20132016? (Assume the equipment is paid for out of cash and that Mydeco earns no interest on its cash balances.)

2. SeeTable2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydecos costs and expenses had been the same fraction of revenues in 20132016 as they were in 2012. What would Mydecos EPS have been each year in this case?

9.6 TABLE 2.5 2012-2016 Financial Statement Data and Stock Price Data for Mydeco Corp. Mydeco Corp. 2012-2016 (All data as of fiscal year end; in $ million) Income Statement 2012 2013 2014 2015 2016 Revenue 401.9 361.6 429.6 513.6 602.6 Cost of Goods Sold (192.1) (175.4) (207.1) (248.3) (295.8) Gross Profit 209.8 186.2 222.5 265.3 306.8 Sales and Marketing (65.0) (64.4) (84.3) (104.9) (121.1) Administration (61.8) (57.1) (59.0) (66.9) (79.8) Depreciation & Amortization (27.5) (26.3) (32.5) (38.3) (40.1) EBIT 55.5 38.4 46.7 55.2 65.8 Interest Income (Expense) (32.4) (31.8) (32.0) (37.0) (40.9) Pretax Income 23.1 6.6 14.7 18.2 24.9 Income Tax (8.1) (2.3) (5.1) (6.4) (8.7) Net Income 15.0 4.3 11.8 16.2 Shares outstanding (millions) 56.8 56.8 56.8 56.8 56.8 Earnings per share $0.26 $0.08 $0.17 $0.21 $0.29 Balance Sheet 2012 2013 2014 2015 2016 Assets Cash 49.4 68.0 91.7 80.4 83.6 Accounts Receivable 87.6 70.6 69.3 77.4 84.2 Inventory 33.5 32.2 27.3 30.2 35.8 Total Current Assets 170.5 170.8 188.3 188.0 203.6 Net Property, Plant & Equip. 244.3 243.3 306.1 349.6 347.9 Goodwill & Intangibles 365.5 365.5 365.5 365.5 365.5 Total Assets 780.3 779.6 859.9 903.1 917.0 Liabilities - Stockholders' Equity Accounts Payable 18.8 18.8 22.4 27.1 30.3 Accrued Compensation 7.6 6.3 7.5 7.7 9.4 Total Current Liabilities 26.4 25.1 29.9 34.8 39.7 Long-term Debt 498.9 498.9 572.2 597.5 597.5 Total Liabilities 525.3 524 602.1 632.3 637.2 Stockholders' Equity 255.0 255.6 257.8 270.8 279.8 Total Liabilities 780.3 779.6 859.9 903.1 917.0 & Stockholders' Equity Statement of Cash Flows 2012 2013 2014 2015 2016 Net Income 15.0 4.3 11.8 16.2 Depreciation & Amortization 27.5 26.3 32.5 38.3 40.1 Chg. in Accounts Receivable 3.9 17.0 1.3 (8.1) Chg. in Inventory (2.9) 1.3 4.9 (2.9) (5.6) Chg in Payables & Accrued Comp. 1.7 (1.3) 4.8 4.9 4.9 Cash from Operations 45.2 47.6 53.1 44.0 48.8 Capital Expenditures (26.6) (23.8) (97.5) (75.4) (40.0) Cash from Investing Activities (26.6) (23.8) (97.5) (75.4) (40.0) Dividends Paid (5.2) (5.2) (5.2) (5.2) (5.6) Sale (or purchase) of stock Debt Issuance (Pay Down) 73.3 25.3 Cash from Financing Activities (5.2) (5.2) 68.1 20.1 (5.6) Change in Cash 13.4 18.6 23.7 (11.3) 3.2 Mydeco Stock Price $7.02 $3.55 $5.86 $8.33 $11.57 9.6 (6.8)