(20pts) On the first day of the year, a new company, ACME, led by Mr. W.E. Coyote: a. Issued 1,000 shares, Par Value $.01 per share, issued at $100 per share. b. Borrowed $50,000 from bank, annual interest rate 3%, due in nine months c. Issued a $850,000 bond maturing in 5 years (4% interest payments annually). d. Purchased a small factory for $780,000 in cash $11 4) (50pts) Mr. Coyote plans to produce dynamite, and a key ingredient is nitroglycerin. At the beginning of each year, he purchases certain amounts of nitroglycerin, and pays the prices per pound, as shown in Table 1. Each year, the ACME factory buys Nitroglycerin and converts each pound into one pound of Dynamite. ACME sells a certain amount of Dynamite at the prices as shown in Table 2. Table 1 Table 2 Year Pound of $ per Pound of $ per Nitroglycerin pound Dynamite pound 9,000 9,000 $22 11,000 $9 | 11,000 $20 12,000 $7 12,000 $19 4 13,000 $5 L | 13,000 $17 Mr. Coyote pays a salesman, a $10,000 salary each year. The factory lasts for 20 years, and depreciates in value 5% of the original purchase price each year. For each year in the table below, provide ACME's Net Income (NI), assuming the tax rate is 40%. Please note that the company only pays taxes if Earnings Before Taxes (EBT) is positive. Show your work for each item: Revenues, COGS, SG&A, depreciation, EBIT, loan interest expense, bond interest expense, EBT, taxes, NI. Year 1 Year 2 Year 3 Year 4 NI What were the Gross Profit Margins (10pts) and Net Profit Margins (10pts) each year? Year 1 Year 2 Year 3 Year 4 GPM NPM 5) (10pts) Now assume there is just one client, Mr. Runner, who buys all of the dynamite ACME sells. He has perfect credit, and pays on account with a one-year delay, i.e. for dynamite he purchased in year 1, he delivers the payment in year 2 (for dynamite purchased in year x, he delivers payment in year x+1). What are ACME's NI each year? Show your work/explanation. Year 1 Year 2 Year 3 Year 4 NI 6) (50pts) Given the transactions at the beginning of Year 1 as described in Q1, and given the client, Mr. Runner, pays "on account with a one-year delay, and assuming the NI each year are as follows (do not use your NI answers from question 5): Year 1 10,000 Year 2 20,000 Year 3 40,000 Year 4 60,000 NI use the Indirect Method, to calculate how much Cash ACME had at the end of each year. Show your work/explanation. Remember: Question 5 creates an Accounts Receivable which did not exist in Question 4. End of Year 1 End of Year 2 End of Year 3 End of Year 4 Cash 7) (10pts) Based on the average Shareholder's equity each year, what were the ROEs? Year 1 Year 2 Year 3 Year 4 ROE ROEL (20pts) On the first day of the year, a new company, ACME, led by Mr. W.E. Coyote: a. Issued 1,000 shares, Par Value $.01 per share, issued at $100 per share. b. Borrowed $50,000 from bank, annual interest rate 3%, due in nine months c. Issued a $850,000 bond maturing in 5 years (4% interest payments annually). d. Purchased a small factory for $780,000 in cash $11 4) (50pts) Mr. Coyote plans to produce dynamite, and a key ingredient is nitroglycerin. At the beginning of each year, he purchases certain amounts of nitroglycerin, and pays the prices per pound, as shown in Table 1. Each year, the ACME factory buys Nitroglycerin and converts each pound into one pound of Dynamite. ACME sells a certain amount of Dynamite at the prices as shown in Table 2. Table 1 Table 2 Year Pound of $ per Pound of $ per Nitroglycerin pound Dynamite pound 9,000 9,000 $22 11,000 $9 | 11,000 $20 12,000 $7 12,000 $19 4 13,000 $5 L | 13,000 $17 Mr. Coyote pays a salesman, a $10,000 salary each year. The factory lasts for 20 years, and depreciates in value 5% of the original purchase price each year. For each year in the table below, provide ACME's Net Income (NI), assuming the tax rate is 40%. Please note that the company only pays taxes if Earnings Before Taxes (EBT) is positive. Show your work for each item: Revenues, COGS, SG&A, depreciation, EBIT, loan interest expense, bond interest expense, EBT, taxes, NI. Year 1 Year 2 Year 3 Year 4 NI What were the Gross Profit Margins (10pts) and Net Profit Margins (10pts) each year? Year 1 Year 2 Year 3 Year 4 GPM NPM 5) (10pts) Now assume there is just one client, Mr. Runner, who buys all of the dynamite ACME sells. He has perfect credit, and pays on account with a one-year delay, i.e. for dynamite he purchased in year 1, he delivers the payment in year 2 (for dynamite purchased in year x, he delivers payment in year x+1). What are ACME's NI each year? Show your work/explanation. Year 1 Year 2 Year 3 Year 4 NI 6) (50pts) Given the transactions at the beginning of Year 1 as described in Q1, and given the client, Mr. Runner, pays "on account with a one-year delay, and assuming the NI each year are as follows (do not use your NI answers from question 5): Year 1 10,000 Year 2 20,000 Year 3 40,000 Year 4 60,000 NI use the Indirect Method, to calculate how much Cash ACME had at the end of each year. Show your work/explanation. Remember: Question 5 creates an Accounts Receivable which did not exist in Question 4. End of Year 1 End of Year 2 End of Year 3 End of Year 4 Cash 7) (10pts) Based on the average Shareholder's equity each year, what were the ROEs? Year 1 Year 2 Year 3 Year 4 ROE ROEL