Question
BALANCE SHEET 12/31/2018 Current Assets Cash And Cash Equivalents 8,719,000 Short Term Investments 270,000 Net Receivables 7,140,000 Inventory 3,126,000 Other Current Assets 2,042,000 Total Current
BALANCE SHEET
12/31/2018
Current Assets
Cash And Cash Equivalents 8,719,000
Short Term Investments 270,000
Net Receivables 7,140,000
Inventory 3,126,000
Other Current Assets 2,042,000
Total Current Assets 21,297,000
Long Term Investments 2,407,000
Property Plant and Equipment 17,587,000
Goodwill 14,806,000
Intangible Assets 15,823,000
Other Assets 5,122,000
Total Assets 77,042,000
Current Liabilities
Accounts Payable 7,211,000
Short/Current Long Term Debt 3,951,000
Other Current Liabilities 6,601,000
Total Current Liabilities 17,763,000
Long Term Debt 28,293,000
Other Liabilities 12,611,000
Total Liabilities 58,667,00
Stockholders' Equity
Total Stockholder Equity 18,375,000
INCOME STATEMENT
31/12/2018
Revenue
Total Revenue 51,728,000
Cost of Revenue 23,502,000
Gross Profit 28,226,000
Operating Expenses
Selling General and Administrative 19,184,000
Operating Income or Loss 9,042,000
Income from Continuing Operations
Other Income/Expenses Net. -1,148,000
Interest Expense 1,220,000
Income Before Tax 6,674,000
Income Tax Expense 2,696,000
Net Income 3,978,000
PROJECTS
Year 0 Year 1 Year 2 Year 3 Year 4
Project A -100,000 50,000 30,000 30,000 20,000
Project B -250,000 100,000 100,000 50,000 50,000
Project C -500,000 400,000 50,000 50,000 50,000
WACC and Capital Budgeting
- Calculate the firm's WACC (using 2018 numbers). (You will need to collect information on the long-term debt and common stock equity from the Balance Sheet. The firm has no preferred stock).
- Use the WACC to calculate NPV and evaluate IRR for proposed capital budgeting projects. Assume the projects are mutually exclusive and the firm has the money available to fund the project.
Analysis
Offer suggestions to a senior financial manager and CFO on the proposed projects. Be sure to include a discussion of external funding and where it should come from if necessary and which project the firm should undertake.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Interpreting and Analyzing Financial Statements
Authors: Karen P. Schoenebeck, Mark P. Holtzman
6th edition
978-0132746243
