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Score: 60 1. out of 60 points (100%) award: 10 out of 10.00 points Use the following information for Taco Swell, Inc., (assume the tax rate is 30 percent): 2010 $ 16,573 1,761 4,479 996 845 6,217 8,140 1,270 20,620 51,108 4,544 14,453 1,450 2011 $ 15,936 1,836 4,807 874 976 6,766 9,727 1,247 24,886 57,090 4,944 15,388 1,718 ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends For 2011, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Cash flow from assets Cash flow to creditors Cash flow to stockholders Th is Worksheet $ -2,489.90 $ -3,290 $ 800.10 Learning Objective: 02-04 How to determine a firms cash flow from its financial statements. sh Use the following information for Taco Swell, Inc., (assume the tax rate is 30 percent): Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends 2010 $ 16,573 1,761 4,479 996 845 6,217 8,140 1,270 20,620 51,108 4,544 14,453 1,450 2011 $ 15,936 1,836 4,807 874 976 6,766 9,727 1,247 24,886 57,090 4,944 15,388 1,718 For 2011, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders. https://www.coursehero.com/file/11335398/Assignment-Print-View2/ (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Cash flow from assets Cash flow to creditors Cash flow to stockholders $ -2,489.90 3% $ -3,290 3% $ 800.10 3% Explanation: TACO SWELL, INC., Balance sheet as of Dec. 31, 2010 Cash $ 6,217 Accounts payable Accounts receivable 8,140 Notes payable $ 4,544 1,270 Inventory Current liabilities $ 5,814 14,453 $28,810 $51,108 Long-term debt Owners' equity $20,620 $53,484 Total assets $79,918 Total liab. & equity $79,918 ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m Current assets Net fixed assets TACO SWELL, INC., Balance sheet as of Dec. 31, 2011 Cash $ 6,766 Accounts payable Accounts receivable 9,727 Notes payable $ 4,944 1,247 Inventory Current liabilities $ 6,191 15,388 Current assets Net fixed assets $31,881 $57,090 Long-term debt Owners' equity $24,886 $57,894 Total assets $88,971 Total liab. & equity $88,971 is TACO SWELL, INC., Income Statement 2010 2011 Sales $ 16,573.00 $ 15,936.00 COGS 4,479.00 4,807.00 Other expenses 996.00 874.00 Depreciation 1,761.00 1,836.00 $ 9,337.00 845.00 $ 8,419.00 976.00 EBT Taxes (30%) Net income $ 8,492.00 2,547.60 $ 5,944.40 $ 7,443.00 2,232.90 $ 5,210.10 Dividends Additions to RE $ 1,450.00 4,494.40 $ 1,718.00 3,492.10 sh Th EBIT Interest OCF = EBIT + Depreciation - Taxes = $8,419 + 1,836 - 2,232.90 = $8,022.10 Change in NWC = NWCend- NWCbeg = (CA - CL) end- (CA - CL) beg = ($31,881 - 6,191) - ($28,810 - 5,814) = $2,694 Net capital spending Cash flow from assets = NFAend - NFAbeg+ Depreciation = $57,090 - 51,108 + 1,836 = $7,818 = OCF - Change in NWC - Net capital spending https://www.coursehero.com/file/11335398/Assignment-Print-View2/ = $8,022.1 - 2,694 - 7,818 = -$2,489.90 Cash flow to creditors = Interest - Net new LTD Net new LTD = LTDend - LTDbeg Cash flow to creditors = $976 - ($24,886 - 20,620) = -$3,290 = Common stockend - Common stockbeg + Retained earnings = Total owners' equity = (OE - RE) end- (OE - RE) beg = OEend- OEbeg + REbeg- REend REend = REbeg + Additions to RE08 . Net new equity = OEend- OEbeg+ REbeg- (REbeg + Additions to RE11) .. OEend - OEbeg - Additions to RE Net new equity = $57,894 - 53,484 - 3,492.1 = $917.90 Net new equity Common stock Net new equity CFS CFS = Dividends - Net new equity = $1,718 - 917.9 = $800.10 As a check, cash flow from assets is -$2,489.90. 2. = Cash flow from creditors + Cash flow to stockholders = -$3,290 + 800.10 = -$2,489.90 award: ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m CFA CFA 10 out of 10.00 points Zigs Industries had the following operating results for 2011: sales = $29,820; cost of goods sold = $19,810; depreciation expense = $5,300; interest expense = $2,640; dividends paid = $1,500. At the beginning of the year, net fixed assets were $17,230, current assets were $5,870, and current liabilities were $3,350. At the end of the year, net fixed assets were $20,710, current assets were $7,450, and current liabilities were $3,990. The tax rate for 2011 was 30 percent. a. What is net income for 2011? Net income $ 1,449 b. What is the operating cash flow for 2011? Operating cash flow $ 9,389 is c. What is the cash flow from assets for 2011? (Negative amount should be indicated by a minus sign.) Th Cash flow from assets $ -331 d-1 If no new debt was issued during the year, what is the cash flow to creditors? Cash flow to creditors sh $ 2,640 d-2 If no new debt was issued during the year, what is the cash flow to stockholders? (Negative amount should be indicated by a minus sign.) Cash flow to stockholders Worksheet $ -2,920 Learning Objective: 02-02 The difference between accounting income and cash flow. Zigs Industries had the following operating results for 2011: sales = $29,820; cost of goods sold = $19,810; depreciation expense = $5,300; interest expense = $2,640; dividends paid = $1,500. At the beginning of the https://www.coursehero.com/file/11335398/Assignment-Print-View2/ year, net fixed assets were $17,230, current assets were $5,870, and current liabilities were $3,350. At the end of the year, net fixed assets were $20,710, current assets were $7,450, and current liabilities were $3,990. The tax rate for 2011 was 30 percent. a. What is net income for 2011? Net income $ 1,449 3% b. What is the operating cash flow for 2011? Operating cash flow $ 9,389 3% c. What is the cash flow from assets for 2011? (Negative amount should be indicated by a minus sign.) Cash flow from assets $ -331 3% d-1 If no new debt was issued during the year, what is the cash flow to creditors? Cash flow to creditors $ 2,640 3% ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m d-2 If no new debt was issued during the year, what is the cash flow to stockholders? (Negative amount should be indicated by a minus sign.) Cash flow to stockholders $ -2,971 3% Explanation: a. Income Statement Sales $ 29,820 Cost of goods sold 19,810 Depreciation 5,300 EBIT Interest $ 4,710 2,640 Taxable income Taxes (30%) $ 2,070 621 Net income $ 1,449 b. Th is OCF = EBIT + Depreciation Taxes = $4,710 + 5,300 621 = $9,389 c. sh Change in NWC = NWCend NWCbeg = (CAend CLend) (CAbeg CLbeg) = ($7,450 3,990) ($5,870 3,350) = $3,460 2,520 = $940 Net capital spending =NFAend NFAbeg + Depreciation = $20,710 17,230 + 5,300 = $8,780 CFA = OCF Change in NWC Net capital spending = $9,389 940 8,780 = $331 The cash flow from assets can be positive or negative, since it represents whether the firm raised funds or distributed funds on a net basis. In this problem, even though net income and OCF are positive, the firm invested heavily in both fixed assets and net working capital; it had to raise a net $331 in funds from its stockholders and creditors to make these investments. https://www.coursehero.com/file/11335398/Assignment-Print-View2/ d. Cash flow to creditors Cash flow to stockholders = Interest - Net new LTD = $2,640 0 = $2,640 = Cash flow from assets Cash flow to creditors = -$331 2,640 = $2,971 We can also calculate the cash flow to stockholders as: Cash flow to stockholders = Dividends Net new equity Solving for net new equity, we get: Net new equity = $1,500 (2,971) = $4,471 The firm had positive earnings in an accounting sense (NI > 0) and had positive cash flow from operations. The firm invested $940 in new net working capital and $8,780 in new fixed assets. The firm had to raise $331 from its stakeholders to support this new investment. It accomplished this by raising $4,471 in the form of new equity. After paying out $1,500 of this in the form of dividends to shareholders and $2,640 in the form of interest to creditors, $331 was left to meet the firm's cash flow needs for investment. 10 out of 10.00 points Prepare a 2011 balance sheet for Cornell Corp. based on the following information: cash = $136,000; patents and copyrights = $630,000; accounts payable = $215,000; accounts receivable = $105,000; tangible net fixed assets = $1,640,000; inventory = $297,500; notes payable = $145,000; accumulated retained earnings = $1,260,000; long-term debt = $854,000. (Be sure to list the accounts in order of their liquidity.) ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m 3. award: CORNELL COP. Balance Sheet Assets Cash Accounts receivable Inventory $ 136,000 105,000 297,500 Current assets Tangible net fixed assets Intangible net fixed assets $ 538,500 1,640,000 630,000 is Total assets $ 2,808,500 Liabilities $ 215,000 145,000 Current liabilities Long-term debt $ 360,000 854,000 sh Th Accounts payable Notes payable Total liabilities Common stock Accumulated retained earnings $ 1,214,000 334,500 1,260,000 Total liabilities & owners' equity $ 2,808,500 Worksheet Learning Objective: 02-01 The difference between accounting value (or \"book\" value) and market value. https://www.coursehero.com/file/11335398/Assignment-Print-View2/ Prepare a 2011 balance sheet for Cornell Corp. based on the following information: cash = $136,000; patents and copyrights = $630,000; accounts payable = $215,000; accounts receivable = $105,000; tangible net fixed assets = $1,640,000; inventory = $297,500; notes payable = $145,000; accumulated retained earnings = $1,260,000; long-term debt = $854,000. (Be sure to list the accounts in order of their liquidity.) CORNELL COP. Balance Sheet Assets Cash Accounts receivable Inventory $ 136,000 3% 105,000 3% 297,500 3% Current assets Tangible net fixed assets Intangible net fixed assets $ 538,500 3% 1,640,000 3% 630,000 3% $ 2,808,500 3% ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m Total assets Liabilities Accounts payable Notes payable $ 215,000 3% 145,000 3% Current liabilities Long-term debt $ 360,000 3% 854,000 3% Total liabilities Common stock Accumulated retained earnings $ 1,214,000 3% 334,500 3% 1,260,000 3% Total liabilities & owners' equity $ 2,808,500 3% Explanation: Total liabilities and owners' equity is: is TL & OE = CL + LTD + Common stock + Retained earnings Th Solving for this equation for equity gives us: sh Common stock = $2,808,500 1,214,000 1,260,000 = $334,500 https://www.coursehero.com/file/11335398/Assignment-Print-View2/ 4. award: 10 out of 10.00 points Chevelle, Inc., has sales of $44,000, costs of $20,600, depreciation expense of $1,700, and interest expense of $1,000. If the tax rate is 35 percent, what is the operating cash flow, or OCF? Operating cash flow $ 16,155 Learning Objective: 02-04 How to determine a firms cash flow from its financial statements. Worksheet Chevelle, Inc., has sales of $44,000, costs of $20,600, depreciation expense of $1,700, and interest expense of $1,000. ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m If the tax rate is 35 percent, what is the operating cash flow, or OCF? Operating cash flow $ 16,155 3% Explanation: To calculate OCF, we first need the income statement: Income Statement Sales $ 44,000 Costs 20,600 Depreciation 1,700 EBIT Interest $ 21,700 1,000 Taxable income Taxes (35%) $ 20,700 7,245 Net income $ 13,455 sh Th is OCF = EBIT + Depreciation - Taxes = $21,700 + 1,700 - 7,245 = $16,155 https://www.coursehero.com/file/11335398/Assignment-Print-View2/ 5. award: 10 out of 10.00 points Your firm has net income of $259 on total sales of $1,100. Costs are $620 and depreciation is $110. The tax rate is 30 percent. The firm does not have interest expenses. What is the operating cash flow? $629 $370 $480 $369 $259 EBIT = $1,100 - $620 - $110 = $370 (Sales - Costs - Depreciation) Taxes = 0.30 $370 = $111 (Tax rate EBIT) 6. award: ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m OCF = $370 + $110 - $111 = $369 (EBIT + Depreciation - Taxes) 10 out of 10.00 points Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,160,000 that is currently appraised at $1,360,000. The equipment originally cost $640,000 and is currently valued at $387,000. The inventory is valued on the balance sheet at $330,000 but has a market value of only one-half of that amount. The owner expects to collect 97 percent of the $185,200 in accounts receivable. The firm has $11,500 in cash and owes a total of $1,360,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm? $908,144 $1,093,344 $1,423,344 $552,000 $743,144 sh Th is Market value = $1,360,000 (building) + $387,000 + (0.5 $330,000) + (0.97 $185,200) + $11,500 - $1,360,000 (amount owed) = $743,144 https://www.coursehero.com/file/11335398/Assignment-Print-View2/ Powered by TCPDF (www.tcpdf.org) \fHomework 1 Finance 3506 Due 09/09/14 1.You have just entered into a long position of 15 contracts in the S&P 500 contracts (trades $250 times the index) at a price of 1700.25. The initial margin for the contact is $19,250 and the maintenance margin is $17,500. Your account at the time you entered into the position had equity of $300,000. At what level of price would you first get a margin call (assume the minimum movement in the S&P 500 futures price .25). If the future close at 1650.50 would you get a margin call and if so how much would the call be for? Initial Margin 15 * $19,250 = $288,750 Maintenance Margin 15 * $17,500 = $262,500 Loss per contract = ($300,000- $262,500)/15 = $2,500 Number of point = $2,500/$250/point = 10 points Therefore it would have to fall below 1,700.25 - 10 = 1,690.25 or 1,690 If price was at 1,650.50 Loss = (1700.25-1,650.5)*$250/point *15 contracts = $186,562.50 Equity = $300,000 - $186,562.50 = $113,437.50