Balance Sheet

As of December 31,2016

Assets

Cash and equivalents 295,500

Accounts receivable 875,000

Inventory 437,500

Total Current Assets 1,608,000

Plant and equipment 475,000

Accumulated depreciation (234,550)

Net Fixed Assets 240,450

Total Assets 1,848,450

Liabilities and Owners Equity

Accounts payable 306,250

Short-term notes payable 88,185

Other current liabilities 18,200

Total Current Liabilities 412,635

Long-term debt 495,800

Total Liabilities 908,435

Common Stock 700,000

Retained earnings 240,015

Total Shareholders Equity 940,015

Total Liabilities and Owners Equity 1,848,450ZHIAO-WAY Inc.

Income Statement

For the year Ended December 31, 2016

Sales 1,750,000

Cost of goods sold 1,225,000

Gross Profit 525,000

Selling and G & A Expenses 262,500

Fixed Expenses 43,750

Depreciation Expense 80,000

EBIT 138,750

Interest Expense 56,800

Earnings Before Taxes 81,950

Taxes @30% 24,585

Net Income 57,365

Note: Inv. Turnover uses C.G.S. instead of Sales for computation.

i.e.,

Inv. Turn = C.G.S. / Inv.

SPREADSHEET ASSIGNMENT # 1: Zhiao-Way Inc./Fin502/WI18

nc. sells two grades of asphalt. In 2017 sales for the two grades were $1,200,000 for Grade 1,

and $865,000 for Grade 2. Cost of goods sold for the two grades were 68% and 60% of sales, respectively.

Selling and G & A expenses continued to increase at a rate of 14% a year. Fixed expenses increased to $75,000,

and $125,000 in depreciation allowance was taken.

also has $180,000 in short-term debt at 6% interest, and has increased its long-term debt by

$105,000 to partially pay for new equipment of $255,000. The remainder of the equipment was paid in cash.

All long-term debt carries an interest rate of 8%. The corporations tax rate is 30% in 2017. Accounts

receivable is at 38% of sales, and inventory at year end is 28% of sales. Accounts payable are held at 25% of

the cost of goods sold. Other current liabilities are $33,000. Common stock remained constant.

The firm retained 65% of its earnings, paying the remaining net income out as dividends. ( Round retained

earnings up to the next dollar.)

1. Prepare Zhiao-Way Inc.s income statement, balance sheet and statement of cash flow for the year 2017,

and as of December 31, 2017. The firms 2016 statements are (next page):

2. Compute .s free cash flow for 2017, and its Return On Invested Capital (ROIC) for the

years 2016, and 2017.

3. Given that Inc.s Weighted Average Cost of Capital (WACC) was 9.25% in 2016 and 2017,

compute its Economic Value Added (EVA) for the years, 2016 and 2017.

4. The industry averages are also provided. Compute Zhiao-Way Inc. s corresponding ratios for 2016 and

2017, and give a concise evaluation of Inc.s financial position.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!I have done the work I just want to double check.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

FIN 502

SPREADSHEET ASSIGNMENT # 1: Inc./Fin502/WI18

1. Prepare Inc.s income statement, balance sheet and statement of cash flow for the year 2017, and as of

December 31, 2017. The firms 2016 statements are (next page):

Income Statement

For the year Ended December 31, 2017

GRADE 1 GRADE 2 TOTAL

SALE $1,200,000 $865,000 $2,065,000

COST OF GOOD SOLD 68%/60% $816,000 $519,000 $1,335,000

GROSS PROFIT $730,000

SELLING EXP 14% MORE $299,250

DEPREDAITION $125,000

EBIT $305,750

INTERES EXPENS

SHORT TERM DEBT 6% $180,000 $10,800

LONG TERM DEBT 8% $105,000 $8,400

EBT $286,550

TAX 30% $85,965

PAT $200,585

RETAIN EARNINGS 65% $130,380

ZHIAO-WAY INC BALANCE SHEET AS OF DECEMBER 31 2017

ASSETS LIABILITY & EQUITY

CASH AND EQUIVALENT 244580 ACC PAYBLE 25% COGS 333750

ACC RECIVEBLE 25% COGS 784700 SHORT TERM NOTE PAYBLE 180000

INVENTORY 28% SALE 578200 OTHER CURENT LIABILITES 33000

TOTAL CURRENT ASSET 1607480 TOTAL CURENT LIABILITES 546750

PLANT AND EQUIPMENT 730000 LONG TERM DEBT 600800

ACCUMULATED DEPRECIATION 359550 TOTAL LIABILITES 1147550

NET FIX ASSET 370450 COMMON STOCKS 700000

RETAIN EARNINGS 130380

Mb

TOTAL ASSET 1977930 TOTAL SHERHOLDER EQUITY 1977930

Cash Flow Statement Dec 2017

Operating Activity

Net income $200,585.00

Depreciation $125,000.00

Acount Reciveble $90,300.00

Inventory -$140,700.00

Acount Payble $152,500.00

Other curent liability $15,000.00

Cash Flow From Operating Activity $442,685.00

Investing Activity

Plant and Equipment -$255,000.00

Cash Flow From Investing Activity $187,685.00

Financing Activity

Short Term note payble $91,815.00

Long term note Payble $105,000.00

Comon stock $-

Divident paid $-

Add beginning cash balance $295,500.00

Ending cash Balance $680,000.00

2. Compute Inc.s free cash flow for 2017, and its Return On Invested Capital (ROIC) for the years 2016,

and 2017.

Free cash Flow = EBIT *(1-Tax) + Depreciation Capital Expentiture Change Working capital

FCF= 305750 * 0.7 + 125000 255000 375085

FCF= - 291060

ROIC= NOPAT/ INVESTED CAPITAL

2016 ROIC= 57365/1848450=3.1%

2017 ROIC=200585/ 1431180= 14%

3. Given that Inc.s Weighted Average Cost of Capital (WACC) was 9.25% in 2016 and 2017, compute its

Economic Value Added (EVA) for the years, 2016 and 2017.

EVA=NOPAT WACC (OPERATING CAPITAL)

2016 EVA= 57365- (9.25%* 297815) = 57365-27547=29817

2017 EVA=200585- (9.25%*571035) =200585-52820=147764