66 Problems 1. Using the data presented below: Sales Cost of Goods Gross Profit Depreciation Selling & Admin. Expense Other Operating Expense Net Operating Income Interest Expense Earnings Before Taxes Taxes Net Income Tax Rate Shares Earnings per Share Notes: Big Rock Candy Mountain Mining Co. Income Statements For the Years 2015 and 2016 2016 $369,300 285,400 83,900 26,820 23,340 1,080 32,660 7,685 24,975 9,990 $14,985 40.00% $2,100 $0.29 Big Rock Candy Mountain Mining Co. Balance Sheet For the Year Ended December 31, 2016 2016 $14,714 $1,841 $41,090 $46,910 $104,555 $388,000 $78,020 $309,980 $414,535 $35,200 $2,850 $38,050 $152,700 $190,750 $52,100 $121,500 $50,185 $223,785 $414,535 Assets Cash Marketable Securities Accounts Receivable Inventory Total Current Assets Gross Fixed Assets Accumulated Depreciation Net Plant & Equipment Total Assets Liabilities & Owner's Equity Accounts Payable Accrued Expenses Total Current Liabilities Long-term Debt Total Liabilities Common Stock ($1.00 par) Additional Paid-in-Capital Retained Earnings Total Owner's Equity Total Liab. & Owner's Equity 2015 $354,000 281,800 72,200 26,360 21,820 1,080 22,940 7,505 15,435 6,174 $9,261 40.00% 52,100 $0.18 2015 $10,300 $550 $42,100 $48,490 $101,440 $352,600 $51,200 $301,400 $402,840 $32,700 $2,740 $35,440 $158,600 $194,040 $52,100 $121,500 $35,200 $208,800 $402,840 Problems 1. Copy the Big Rock Candy Mountain Mining financial statements from Problem 1 in Chapter 2 into a new workbook. a. Set up a ratio worksheet similar to the one in Exhibit 3-6, page 92, and calculate all of the ratios for the firm. b. Identify at least two areas of potential concern using the ratios. Identify at least two areas that have shown improvement. C. In 2016 the ROE increased. Explain, in words, why this increase occurred usi the DuPont method from equation (3-29). Now use the extended DuPont method from equation (3-33). d. Big Rock Candy Mountain Mining has shown an accounting profit in each of the past two years. Calculate the economic profit for these years and compare it to net income. The WACC is 9%. e. Using Altman's model for privately held firms, calculate the Z-score for Mike Owjai Manufacturing. Does it appear that the firm is in imminent danger of bankruptcy? 66 Problems 1. Using the data presented below: Sales Cost of Goods Gross Profit Depreciation Selling & Admin. Expense Other Operating Expense Net Operating Income Interest Expense Earnings Before Taxes Taxes Net Income Tax Rate Shares Earnings per Share Notes: Big Rock Candy Mountain Mining Co. Income Statements For the Years 2015 and 2016 2016 $369,300 285,400 83,900 26,820 23,340 1,080 32,660 7,685 24,975 9,990 $14,985 40.00% $2,100 $0.29 Big Rock Candy Mountain Mining Co. Balance Sheet For the Year Ended December 31, 2016 2016 $14,714 $1,841 $41,090 $46,910 $104,555 $388,000 $78,020 $309,980 $414,535 $35,200 $2,850 $38,050 $152,700 $190,750 $52,100 $121,500 $50,185 $223,785 $414,535 Assets Cash Marketable Securities Accounts Receivable Inventory Total Current Assets Gross Fixed Assets Accumulated Depreciation Net Plant & Equipment Total Assets Liabilities & Owner's Equity Accounts Payable Accrued Expenses Total Current Liabilities Long-term Debt Total Liabilities Common Stock ($1.00 par) Additional Paid-in-Capital Retained Earnings Total Owner's Equity Total Liab. & Owner's Equity 2015 $354,000 281,800 72,200 26,360 21,820 1,080 22,940 7,505 15,435 6,174 $9,261 40.00% 52,100 $0.18 2015 $10,300 $550 $42,100 $48,490 $101,440 $352,600 $51,200 $301,400 $402,840 $32,700 $2,740 $35,440 $158,600 $194,040 $52,100 $121,500 $35,200 $208,800 $402,840 Problems 1. Copy the Big Rock Candy Mountain Mining financial statements from Problem 1 in Chapter 2 into a new workbook. a. Set up a ratio worksheet similar to the one in Exhibit 3-6, page 92, and calculate all of the ratios for the firm. b. Identify at least two areas of potential concern using the ratios. Identify at least two areas that have shown improvement. C. In 2016 the ROE increased. Explain, in words, why this increase occurred usi the DuPont method from equation (3-29). Now use the extended DuPont method from equation (3-33). d. Big Rock Candy Mountain Mining has shown an accounting profit in each of the past two years. Calculate the economic profit for these years and compare it to net income. The WACC is 9%. e. Using Altman's model for privately held firms, calculate the Z-score for Mike Owjai Manufacturing. Does it appear that the firm is in imminent danger of bankruptcy