60 5 Total assets Total marks for assignment 1. Publica, a large public company recently restructured its shares so that the shareholders no longer have limited liability. Instead, shareholders now have unlimited liability for Publico's debts. As an investor, would you invest in the company? If more companies were to do this, what impact could there be on the functioning of primary and secondary markets for common stock!! Zeke's Zebra Farm Zeke's Zebra Farm alance sheets as of July 31 2021 and Aug 31 2021 (in 1.000s CDN) August Income Statement in $1,000s CDN) July August Net sales $4,850 Cash $1.225 S1313 Cost of goods sold 53.150 Accounts rec. $987 $1.089 Depreciation $1,100 Inventory $1,923 $1.988 EBIT SOO Current assets $4,135 $4,390 Interest paid S456 Net fixed assets $2,800 $2.782 Taxable income $144 $6,935 $7.172 Tuxes 529 Net income SIIS July August Accounts payable $998 $1.059 Notes payable $187 S223 Current liabilities $1.185 $1.282 Long-term debt $1,950 $2.928 Retained earnings $3,800 $2.962 Total LAF $6,935 $7.172 2. Use the balance sheet and income statement above, to complete the following: S2,950 53.108 *Parts All refer to August month and A. What is the change in net working capital? B. What is the net capital spending? C. What is the OCF D. What is the cash flow from assets E. What is the ending networking capital? F. What is the net new equity? G. What is the cash flow to stockholders? *A dividend of S115.20 was paid H. What is the cash flow to creditors! L Prove that the cash flow equation is in balance 3. Your classmate Zarren Duffet is a firm believer in book values. According to Zarren, book values can be supported with documentation and therefore are not subject to argument or misstatement. You recently began working as a financial analyst for HSBC, and your managers have all told you that market values for assets are more informative and useful than book values. In fact one of your managers recently said that anyone who thinks in the realm of book values is completely wasting their time. Zarren counters by emphasizing that book values are reliable, with no subjectivity. You're about to make a presentation to a major client - how will you explain which of these is more important, historical book values or market values? 18 5 4. The Hartvikson Corporation recently paid $2,800,000 in dividends and 51.800.000 in interest expense. For the year just ended the addition to retained earnings was $2.100.000 and net new equity was 5851.870. The tax rate is 22 percent. Sales are $17.125.000 and depreciation is $8.555.600. A. What are the earnings before interest and taxes? B. Calculate the interest tax shield for the year 5 5.A. The Adagio Corporation recently purchased a long-term asset for $580,250,000. The company's CFO expects that the asset will have a 15 year life. The asset has a 28% CCA rate. Al the end of year 15, it is expected that the company will be able to sell the asset for $2.5 million. Given this information, determine the value of the terminal loss or recapture at the end of year ten 5 5.B. Adagio's effective tax rate is 25%. How much tax will the company save in year thirteen, due to the inclusion of CCA in the income statement? 2 6. Spreadsheet Land, a new and very exciting family amusement park, has total sales of $786,611 and costs of S524.268 Depreciation is $38,470 and the tax rate is 31 percent. The park does not have any . interest expense. What is the operating cash flow! 5 7. Imran's personal tax rates are shown below. His income last year was $1.5 million and the first $16,000 camed was tax-exempt. A. How much income tax will Imran pay? B. Calculate the marginal tax rate C. Calculate the average tax rate. D. How many dollars of tax will he pay, in the top bracket? Income Tax rate First 845,650 24.15% over $45,650 up to $47,630 26,20% over $47,630 up to $95,259 30.80% over $95.259 up to $129,214 38.00% over 129,214 up to $147,667 40.60% over $147,667 up to $210,371 42.50 over $210,37 46.75% 8. Your neighbour Marlyse Fritzen is smart, mathematically inclined, a wizard with a spreadsheet, and very knowledgable with regard to markets. She follows six major publically traded technology companies, and she analyzes these stocks using ratios and a lot of math. Whenever the topic of irrational markets comes up, Marlyse laughs it off, saying "For the stocks that I follow, everything can be neatly wrapped up in a ratio or some math. With this approach I will always be able to identify stocks that will make money for me while avoiding any losers. Behavioral finance is fine if you like worrying about how people think, but successful trading always comes down to numbers." You have told her several times that there is more to the market than just calculations, but her opinion has not budged. Critique Marlyse's comments. 9. For a company like Samsung, how can ethics affect the share price of the company's common stock