I need help answering 7 questions on this prep test - can someone help?

Moores Familay Restaurant Financial Data Income & Expense Statement Sales Cost of Product Labor Benefits Utilities Loan Principle Repayments Insurance Property Taxes Services (accounting, trash, cleaning, etc.) Other: SG&A, advertising, promostions Total Costs Earnings Before Interest, Income Taxes, & Depreciation (EBITD) Interest on loan Income Taxes Depreciation on values Earnings After Interest, Income Taxes, & Depreciation Meals Sold Average Meal Value Historic Performance (Old Business Mode 2009 2010 $1,794,000 $1,677,120 $485,000 $714,250 $298,600 $294,856 $46,269 $48,651 $58,500 $61,425 $35,000 $65,000 $7,560 $8,505 $20,000 $21,000 $6,800 $13,600 $957,729 $1,227,287 $836,271 $449,833 $234,156 $125,953 $602,115 $323,880 312,000.00 279,520.00 5.75 6.00 ormance (Old Business Model) % Change 2011 2012 2009-2012 $1,635,750 $1,620,060 -9.70% $784,963 $797,211 64.37% $292,516 $330,772 10.77% $48,265 $57,647 24.59% $58,047 $67,721 15.76% n/a $100,000 $115,000 228.57% $8,505 $9,072 20.00% $25,000 $29,000 45.00% $27,200 $35,360 420.00% $1,344,496 $1,441,783 50.54% $291,254 $178,277 -78.68% n/a $81,551 $49,918 -78.68% n/a $209,703 $128,359 -78.68% 261,720.00 249,240.00 -20.12% 6.25 6.50 13.04% Moores Familay Restaurant Financial Data Budget Worksgheet Sales Cost of Product Labor Benefits Utilities Loan Principle Repayments Insurance & Property Taxes Services (accounting, trash, cleaning, etc.) Other: SG&A, advertising, promostions Total Costs Earnings Before Interest, Income Taxes, & Depreciation (EBITD) Interest on loan Income Taxes Depreciation on values Earnings After Interest, Income Taxes, & Depreciation Meals Sold Average Meal Value 2013 $1,575,396 $697,211 $330,772 $79,872 $54,340 $0 $110,000 $41,051 $77,629 $1,390,875 $184,521 $3,500 $51,666 $71,176 $58,179 233,392 6.75 2014 (Present Day) $1,696,296 $597,211 $340,695 $114,519 $50,644 $0 $110,000 $43,908 $84,771 $1,341,748 $354,548 $3,000 $99,273 $61,777 $190,497 242,328 7.00 2015 Budget Forecast Answer to number 17 Answer to number 18 Answer to number 19 Answer to number 20 $58,241 $0 $110,000 Answer to number 21 $93,248 Answer to number 22 Answer to number 23 $3,000 #VALUE! $61,177 #VALUE! 261,714 7.35 Moore's Family Restaurant Assets & Liabilities as of 12/31/13 ASSETS Cash Accounts Receivable Inventories Prepaid Expenses Total Current Assets $492,118.00 $29,000.00 $30,000.00 $2,000.00 $553,118.00 Building Equipment Fixtures $727,460.97 $14,500.00 $33,320.00 Total Fixed Assets Total Assets $775,280.97 $1,328,398.97 LIABILITIES Accounts Payable $57,432.00 Wages and Benefits Due $16,516.59 Estimated Taxes and Fees $6,013.00 Total Current Liabilities $79,961.59 Long Term Loan $70,000.00 Total Long-Term Liabilities $70,000.00 Owner Equity Total Liabilities and Owner Equity $1,178,437.38 $1,328,398.97 Assets & Liabilities projected to 12/31/14 ASSETS Cash Accounts Receivable Inventories Prepaid Expenses Total Current Assets $589,118.00 $49,095.00 $30,000.00 $11,000.00 $679,213.00 Building Equipment Fixtures $760,000.00 $18,000.00 $35,500.00 Total Fixed Assets Total Assets $813,500.00 $1,492,713.00 LIABILITIES Accounts Payable $137,566.00 Wages and Benefits Due $29,543.00 Estimated Taxes and Fees $8,013.00 Total Current Liabilities $175,122.00 Long Term Loan $70,000.00 Total Long-Term Liabilities $70,000.00 Owner Equity Total Liabilities and Owner Equity $1,247,591.00 $1,492,713.00 10. What is the net income figure to use as a starting point for the statement of cash flows for the year ending Earnings After Interest, Income Taxes, & Depreciation from 2014 Remember to always start with net income, from there on the csah flow statement a cash flows for the year ending 2014? he csah flow statement adjustments are made to get a better sense of the company's actual cash po y's actual cash position. 11. The total adjustments to net income to determine cash flows from operating activities Cash flows from operating activities: Net income (earnings after taxes) Adjustments to determine cash flow from operating activities: Add back depreciation Increase in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Increase in Wages and Benefits due Increase in estimated taxes and fees Total adjustments Net cash flow from Operating Activities are......(Hint: be s ities are......(Hint: be sure to add up changes in current assets and current liabilities as noted on the balance sheet goin Net income figure goes here depreciation added back here I am giving you here the changes in current assets and liabilities. It is up to you to figure out what the numbers are and whether or not they are positive or negative. Remember that increases in assets is money out of your pocket while increases in liabilities is money in your pocket. The total adjustements at the end adds up all the positiveegative numbers included as part of the operating activities section of the cash flow statement. This is the figure in yellow, that is the answer you are calculating here. This gets back to the cash flow statement mentioned in week 2, so it may be a good idea to review those notes. ed on the balance sheet going from year 2013 to year 2014) to get the answer. 12. Net cash flows from operating activities are....(hint: don't forget about net income). Cash flows from operating activities: Net income (earnings after taxes) Adjustments to determine cash flow from operating activities: Add back depreciation Increase in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Increase in Wages and Benefits due Increase in estimated taxes and fees Total adjustments Net cash flow from Operating Activities I am giving you here the changes in current assets and liabilities. It is up to you to figure out what the numbers are and whether or not they are positive or negative. Remember that increases in assets is money out of your pocket while increases in liabilities is money in your pocket. The total adjustements at the end adds up all the positiveegative numbers included as part of the operating activities section of the cash flow statement. Don't forget to add in depreciation and your net income figures here. Note the answer in yellow that you are calculating is different here than in the previous problem. This gets back to the cash flow statement mentioned in week 2, so it may be a good idea to review those notes. 13. Specifically, when lookinat the cash flows from investing activities, what value should be entered for an increase Cash flows from investing activities: Increase in buildings Increase in equipment Increase in fixtures Net cash flows from investing activities e entered for an increase in building investments? I am giving you here the changes in cash flows from investing activities. It is up to you to figure out what the numbers are and whether or not they are positive or negative. Remember that increases in assets is money out of your pocket while increases in liabilities is money in your pocket. Here note the number in yellow and what is being asked for, just the building figure. As in previous sections you have to calculate this based on how the balance sheets change from year to year. This gets back to the cash flow statement mentioned in week 2, so it may be a good idea to review those notes. ash flows u to figure er or not ber that ur pocket n your what is re. As in te this ange from sh flow may be a 14. Net Cash flows from investing activities are.... Cash flows from investing activities: Increase in buildings Increase in equipment Increase in fixtures Net cash flows from investing activities I am giving you here the changes in cash flows from investing activities. It is up to you to figure out what the numbers are and whether or not they are positive or negative. Remember that increases in assets is money out of your pocket while increases in liabilities is money in your pocket. Here note the number in yellow and what is being asked for, the net cash flows from investing activities. This means that you have to take a look at how buildings, fixtures and equipment collectively change and sum up all the values. As in previous sections you have to calculate this based on how the balance sheets change from year to year. This gets back to the cash flow statement mentioned in week 2, so it may be a good idea to review those notes. n cash flows from to figure out what not they are positive ases in assets is creases in liabilities and what is being m investing ve to take a look at ment collectively . As in previous s based on how the to year. This gets mentioned in week 2, those notes. 15. Cash flows from financing activities are... Cash flows from financing activities: Increase in bonds payable Preferred stock dividends paid Common stock dividends paid Net cash flows from financing $0.00 $0.00 $0.00 $0.00 Here is a hint....these values are zero because Mr. Moore is runnin owners other than him!!!! Remember, this is a family-owned busin at this point. Hence, there are no stocks or bonds people are buyin revenue. If there were, then there would be values for these numb e Mr. Moore is running a small business with no a family-owned business with no other investors onds people are buying as alternative sources of values for these numbers. 16. Net increase/decrease in cash flows is.... Cash flows from operating activities: Net income (earnings after taxes) Adjustments to determine cash flow from operating activities: Add back depreciation Increase in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Increase in Wages and Benefits due Increase in estimated taxes and fees Total adjustments Net cash flow from Operating Activities Cash flows from investing activities: Increase in buildings Increase in equipment Increase in fixtures Net cash flows from investing activities Cash flows from financing activities: Increase in bonds payable Preferred stock dividends paid Common stock dividends paid Net cash flows from financing Net increase (decrease) in cash flows Net Income from the 2014 income statement depreciation from the 2014 income statement Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 11 and 12 Answer calculated based on your work from problems 13 and 14 Answer calculated based on your work from problems 13 and 14 Answer calculated based on your work from problems 13 and 14 Answer calculated based on your work from problems 13 and 14 Answer calculated based on your work from problem 15 Answer calculated based on your work from problem 15 Answer calculated based on your work from problem 15 Answer calculated based on your work from problem 15 The answer for this problem is in yellow, this is summing up all the values from what you calculated in problems 11,12,13,14 ated in problems 11,12,13,14 and 15 FIN 300 Final: Moore's Family Restaurant Case Study Note: All financial data in this case is found in the excel spreadsheet that goes along with this case study. A. Past & Current Operations \"Moore's Family Restaurant\" is a restaurant on the edge of the downtown area in a medium-size, eastern city. It is on one corner of a major federal highway and a busy cross-town state highway with easy access to the interstate. The restaurant has a reputation for good \"home cookin'\" at reasonable prices. It provides an ample but simple \"1920's/1930's\" sit-down area for eating. Many of its customers have been coming here for years although most of them have moved to the suburbs so fewer stop in as much anymore. The restaurant was founded in 1916 by Sam Moore who ran it until his son George took over in 1945. George Moore turned the business over to his son, George, Jr. in 1975. For the next 20 years or so George Moore, Jr. ran the business with his brothers and a sister until they lost interest in the business. The last of Mr. Moore's siblings relinquished any ownership in the business to Mr. Moore in 1997. The restaurant has always served meals prepared from fresh, home-made and local products obtained from farms, provision houses and local merchants. The restaurant has an active alcohol beverage license, but no longer uses it. The restaurant stopped serving alcohol in the '70's when the neighborhood began to change. Furniture, fixtures and equipment are old, but fully serviceable and reasonably efficient for the business volume. Despite its age and use many customers comment on the \"charm\" of the dcor and how the \"place never changes.\" The restaurant has had no difficulty with health authorities, customers or neighbors. Since the restaurant was founded the downtown area has changed from one thronged with neighborhood residents, shoppers, factory and warehouse workers to one with a dwindling number of office workers, government workers and transient motorists. During this same period the number of family-owned and -operated restaurants has declined steadily, being replaced by chain restaurants and up-scale \"white table cloth establishments.\" From being the only restaurant in the neighborhood Moore's Family Restaurant now has competition: Wendy's, KFC, and Taco Bell are on the other 3 corners of the intersection at which it's located. As a result of these changes, changes in consumer preference and other reasons, business and profits have been on the decline for several years. In the last 2-3 years this decline has been severe. In 2012 Mr. Moore asked his son, Tom, who is an executive with a local company and a Wilmington University MBA, for a \"strategic plan\" for the restaurant. Tom, in turn, asked some friends of his, a team of consultants with whom he worked, to \"come in and take a look at the business in order to help out my dad.\" The consulting team recommended that Mr. Moore take advantage of the \"old fashioned\" dcor and Moore Family Restaurant's reputation to convert it into an upscale \"theme\" restaurant. They also made these recommendations: Re-appraise the value of the land, building and fixtures to reflect current values (increases in the 30+ years since the values on the balance sheet were set). Apply for an \"Inner City Renovation Grant\" for preferential loan and tax rates for renovated property in the city's core. Activate the liquor license, refurbish the restaurant, put in a 1920's \"speakeasy\" bar, but don't change the \"antique\" appearance. Take out a revolving line of credit (which it could draw upon if needed) of up to $100,000 against the re-appraised value of land and buildings to pay for the improvements. This is costing him 3% per year since interest rates are so low and is expected to remain at 3% during the 10 year draw period. For now he won't have to pay any loan balances off, just interest only payments during the initial draw period. Change the source (but not the nature or quality) of food, supplies and services to reduce costs; upgrade and professionalize the labor (cooks and servers); revise pricing and the \"business model\". Continue to accept credit cards (Master Card, Visa, American Express & Discover) for 50% of meals are charge sales. Use 365 as the number of \"selling days\" per year to coincide with bank practice and calculations. Consider opening up a catering business as a new revenue stream to reach out to new Customers. Mr. Moore followed all the recommendations, which resulted in the financial statements in the excel spreadsheet that accompanies this exam. Use the data in the excel document accompanying this exam to compute these ratios for 2012 in the Final Exam Test (next item on the Blackboard site). You may find this worksheet helpful to make your calculations and review them before submitting them to the actual test in Blackboard. B. Potential Retirement Through good years and not so good, Mr. Moore maintained that he enjoyed the business and wanted to stay in business as long as possible, particularly in order to participate in the current economic boom. But, Mr. Moore is in his 60's. He is concerned about the business' future as well as his own. On the one hand he says he would like to \"run the business as always, for as long as I'm able\"; on the other hand he has been heard to say \"it gets harder all the time. Maybe I should just pack it in.\" At the end of 2013 Mr. Moore asked if he would be able to retire at that time. The consulting team evaluated selling the business for its book value (Owner Equity). The team would use the Owner Equity in the business realized from a sale in order to buy an investment that would pay Mr. Moore 3% per year (paid annually in one payment). At the end of 2013 Mr. Moore was 61 years old. It was suggested that he plan to live until he is 100 to make sure his money lasts, thus the money would be invested for 40 years. Mr. Moore said he'd consider retiring if the investment could produce $100,000 per year for his retirement so he can indulge in his passions - badminton, bocce and butterflies. C. Ongoing Operations Use data below for questions 17-23 in this section and the data in the MS Excel attachment to calculate a budget for 2015. Hint: You may find it helpful to create a \"standard\" P&L which states all data as a percent of sales. Some \"planning\" questions will provide all needed data in the questions themselves. Mr. Moore believes that roughly 8% more meals can be served in 2015 (due to the new strategy kicking into high gear) so he plans to serve 261,714 meals in 2015. He also plans to adjust prices so an average meal will be $7.35 per meal. Hint: \"Sales\" have been calculated as number of meals served x average price per meal. The consulting team believes that the cost of product (calculated as a percent of sales) can be 35% of sales in 2015. Mr. Moore wants to keep the good staff he hires and so is planning to give \"cost of living raises\" of 2.5% over 2014 in the next year. Benefits will remain at the current 35% of the labor cost next year. The utility companies have advised all business customers that rates will increase by 15% next year. According to the loan agreement, there will be no repayment of principle on the revolving line of credit (since we are currently in the draw period). Hence payments being made are just interest payments which are expected to be $3,000 total in 2015. * Because of agreements with the city and the insurance company (from whom he received his loan) taxes and insurance will remain the same in 2015.* Likewise depreciation expense will remain the same as in 2014.* Service costs are expected to grow by 15% next year plus an added $55,000 is to be budgeted for extra accounting services. Other Expenses (GSA, advertising and promotion and other) are expected to increase by 10% from 2014. The heavy advertising of the new restaurant should not be necessary and there's been time to plan for some other efficiencies. The income tax rate is expected to be 28% of EBITD which is reduced for interest and depreciation, the same percent of EBITD as in 2014. D. Retirement Revisited (Questions 25 and 26) Assume Mr. Moore operates the \"Reengineered Business\" until the end of your budget period (2015). At that time he would sell the business for its book value (Owner Equity). It is estimated that the Owners Equity would grow to at least $1,825,684. Mr. Moore would use this amount to buy an investment that would pay him 6% per year (paid annually in one payment). At the end of 2015 Mr. Moore will be eligible for Social Security payment of $14,500 per year at that time. It was suggested that he plan to live until he is 100 to make sure his money lasts, thus the money would be invested for 40 years. Mr. Moore said he'd consider retiring if the investment and Social Security produced a total of $150,000 per year for his retirement. FIN 300 - FINAL EXAM QUESTIONS You will find the excel worksheet that goes along with this final essential to make your calculations. Please use the numbers off that spreadseheet and review your calculations for accuracy before submitting your answers to Blackboard. Ignore categories or calculations not mentioned in this case or for which there are no questions on the exam. Exam Questions: 1. What is the profit margin on sales for 2014? Round the answer to the nearest whole percentage and show the percent (%) sign. 2. What is the current ratio for 2014? 3. What is the average collection period for 2014? Assume there are 365 \"selling days\" in the year. Show the answer rounded to the nearest whole number. 4. What is the fixed asset turnover for 2014? 5. The balance sheet (not shown in the excel document) as of 12/31/12 shows that Owner Equity was $798,918. If this amount were invested at 3% paid out annually for 40 years, what annual income would the investment produce? (Tip: His investment would be a \"payment\"). 6. The following are options for increasing the return on Mr. Moore's retirement income (as calculated in number 5 ): Work a little longer, invest at a higher rate of return, sell the business for more (that is, increase \"PV\"), increase the number of years for which the money is invested, wait to become eligible for social security payments T/F 7. What is the Return on Equity for 2014? 8. What is the Return on Total Assets for 2014? 9. In your opinion is this a \"viable business\" that Mr. Moore can operate for \"as long as he wants to\"? Evaluate the business from 2009 to 2014 in the process of answering this question. These values have been entered on the worksheet; there is no need to calculate these amounts. Calculate and enter only those amounts on the exam with question numbers' shown. * Since this problem requires a financial analysis, I am including information about the answer choices you will encounter on the exam in Blackboard below: 1 2 3 4 5 Yes, but into 2015 he should figure out how to make his company more cost and expense, efficient, so that ROS improves YES, but in 2015 he should be mindful of keeping total costs as a percent of sales under control YES, because Return on Sales has always been trending upwards NO, because Cost of Product continues to increase and Cost of Product as a % of sales is decreasing. NO, because income taxes are out of control 6 Both 1 and 2 7 Both 2 and 3 10. What is the net income figure to use as a starting point for the statement of cash flows? 11. The total adjustments to net income to determine cash flows from operating activities are......(Hint: be sure to add up changes in current assets and current liabilities as noted on the balance sheet going from year 2013 to year 2014) to get the answer. 12. Net cash flows from operating activities are....(hint: don't forget about net income). 13. Cash flows from investing activities are..... 14. Net Cash flows from investing activities are.... 15. Cash flows from financing activities are...(hint: since this is a partnership common and preferred stocks and bond financing does not exist). 16. Net increase/decrease in cash flows is.... 17. What is to be the Sales budget for 2015? 18. What is to be the Cost of Product for 2015? 19. What is to be the Labor budget for 2015? 20. What is to be the Benefits budget for 2015? 21. What is to be the Cost of Services for 2015? 22. What are Total Costs to be budgeted for 2015? 23. What are Earnings before Interest, Taxes and Depreciation (EBITD) to be for 2015? 24. Mr. Moore is considering selling the business at the end of 2015 for his Owners Equity (projected to be at least $1,825,684) and using that amount to buy an investment that would pay him 6% per year (paid annually in one payment) for 40 years. What would the annual payment from such an investment be? 25. Will the combination of investment return and Social Security payments described in the text of the case meet Mr. Moore's minimum retirement goals? 1) No, it will fall short of his goal by approximately $14,160 2) Yes, it exceeds his goal by approximately $14,160 3) Yes. It exceeds his goal by well over $40,000. 4) Not enough information to tell. 26. When he was 30 years old, about the time he took over the restaurant from his father, Mr. Moore bought an unusual insurance policy: it was in the form of a \"zero coupon\" bond. The bond paid 5% per year and guaranteed him $475,000 when it matured in 50 years. He paid a single premium amount and no further payments were necessary. What did Mr. Moore pay for the policy when he bought it? Hint: This is a problem in PV (present value). 27. Mr. More wants to get into the catering business, specifically by using his family's secret sauce recipe which can be used on any meat product (i.e. hamburgers, hotdogs, chicken, etc.). To transport food, he bought a small SUV as a delivery truck for $75,000. He financed it for 2 years at 12% and will make equal payments each month for the 6 years. What will the monthly payments be? 28. About the SUV that Mr. Moore was thinking of buying for $75,000.00 and financing at 12% for 2 years: When the vehicle is paid off, how much will have been paid for the truck? 29. When shopping to buy the SUV for a delivery truck, a competing dealer offered him two options to finance the purchase price of $65,000 for the same truck: Cash Back Option - $10000 \"Cash Back\" and the balance paid in yearly installments at 5% (compound interest) per year for 5 years (to be applied as a downpayment to reduce the price) Full Price Option - full price ($65,000) paid at no interest over 5 years. Under which option will the truck cost the LEAST? Hint: Don't forget to take \"cash back\" into account. 1) Can't tell. Need more information about alternative investment and finance rates. 2) The \"Cash Back\" option 3) The \"Full Price\" option 4) Either option. They both produce the same result. 30. In your new position as head accountant (so OK - you're the only accountant but it will sound better on your resume) working for Mr. Moore, you note that last month on July 2, 2012 they bought "research equipment and certain special tools" for $60,000 (you don't want to know what they will do with those "special tools") anyway your job is to lower their corporate taxes if possible. So you decide to use MACRS for depreciation and you want to see if there is any possible depreciation that could be used. How much can they take for these years listed below? 2012, 2014, 2015, 2017. 31. Mr. Moore was thinking of taking a vacation and going to the Sun Highway in Glacier National Park - located in northwestern Montana - since it is one of the most spectacular drives in North America. Unfortunately he found out from some relatives in the area that the road needs to be resurfaced due to many harsh winters. Him being the finance wizard that he is, he was thinkint about how the state would finance such a project with bonds. If the State of Montana has decided to sell state bonds to cover the needed repairs, A Montana state savings bond can be converted to $100 at maturity six years from purchase. If the state bonds are to be competitive with U.S. savings bonds, which pay 8% annual interest (compounded annually), at what price must Montana sell its bonds? (Assume no cash payments on savings bonds prior to redemption.) 32. Mr. Moore is thinking about how much the return of Apple stock could be given it's beta of 1.11 for a possible investment he wants to make. Other data you have collected: the rate of return on 90 day T-Bills is 1.5%, on 5 year T-Notes it 3% and on the "long bond", the 30-year T- Bond = 6.5%. The Prime is 6%, LIBOR is 5.5% and the average return on the overall stock market is estimated to be 8%.After doing some research and crunching the numbers what would Mr. Moore expect the rate of return on Apple's stock to be?Hint: note that term "beta" there's a classic formula that uses "beta"! 33. Mr. Moore plans on replacing and/or upgrading the furniture, fixtures and machinery (stoves, refrigerators, AC, etc) in 10 years when it's expected to wear out at the end of its useful life. The estimated replacement cost is $350,000. How much must the company save each year at 3% to accumulate enough to replace the machine? (Hint: Switch \"mental gears\" to TVM?) Again, please refer to the excel spreadsheet that comes with this exam for data needed to answer the problems. In that sheet is located current and historical P&L information along with balance sheet information. This information is critical to your being able to answer the questions