Luther Corporation Consolidated Balance Sheet December 31, 2009 and 2008 (in $ millions) 2009 2008 Assets Current Assets Cash 63.6 58.5 Liabilities and Stockholders' Equity 2009 2008 Current Liabilities Accounts payable 87.6 73.5 Notes payable/ short-term debt 10.5 9.6 Current maturities of long-term debt 39.9 36.9 Other current liabilities 6.0 12.0 Total current liabilities 144.0 132.0 Accounts receivable 55.5 39.6 Inventories 45.9 42.9 Other current assets 6.0 3.0 Total current assets 171.0 144.0 239.7 168.9 66.6 109.5 119.1 62.1 91.5 99.6 Long-Term Liabilities Long-term debt Capital lease obligations Total Debt 239.7 168.9 Long-Term Assets Land Buildings Equipment Less accumulated depreciation Net property, plant, and equipment Goodwill Other long-term assets Total long-term assets (56.1) (52.5) Deferred taxes 22.8 22.2 239.1 200.7 60.0 63.0 42.0 362.1 242.7 Other long-term liabilities Total long-term liabilities 262.5 191.1 Total liabilities 406.5 323.1 Stockholders' Equity 126.6 63.6 Total liabilities and Stockholders' Equity Total Assets 533.1 386.7 533.1 386.7 2008 578.3 (481.9) 96.4 Luther Corporation Consolidated Income Statement Year ended December 31 (in $ millions) 2009 Total sales 610.1 Cost of sales (500.2) Gross profit 109.9 Selling, general, and administrative expenses (40.5) Research and development (24.6) Depreciation and amortization (3.6) Operating income 41.2 Other income Earnings before interest and taxes (EBIT) 41.2 Interest income (expense) (25.1) Pre-tax income 16.1 Taxes (5.5) Net income 10.6 (39.0) (22.8) (3.3) 31.3 31.3 (15.8) 15.5 (5.3) 10.2 Price per share (market) Shares outstanding (millions) Stock options outstanding (millions) $16 10.2 0.3 $15 8.0 0.2 126.6 63.6 Stockholders' Equity Total Liabilities and Stockholders' Equity 533.1 386.7 a) What is Luther's quick ratio in 2008? (3 points) b) What is Luther's inventory days in 2009? (3 points) c) The manager projects that the total sales in 2010 will follow the same growth rate as the previous year and that the company can maintain the same net profit margin as in 2009. What is the projected net income in 2010? (3 points) d) The manager uses the projected earnings from (c) and the average price-to-earnings ratios in 2008 and 2009 as the multiples to project the stock price in 2010. Assuming that in 2010 the company will have the same number of shares outstanding as in 2009, what will be the projected price per share? (3 points) Luther Corporation Consolidated Balance Sheet December 31, 2009 and 2008 (in $ millions) 2009 2008 Assets Current Assets Cash 63.6 58.5 Liabilities and Stockholders' Equity 2009 2008 Current Liabilities Accounts payable 87.6 73.5 Notes payable/ short-term debt 10.5 9.6 Current maturities of long-term debt 39.9 36.9 Other current liabilities 6.0 12.0 Total current liabilities 144.0 132.0 Accounts receivable 55.5 39.6 Inventories 45.9 42.9 Other current assets 6.0 3.0 Total current assets 171.0 144.0 239.7 168.9 66.6 109.5 119.1 62.1 91.5 99.6 Long-Term Liabilities Long-term debt Capital lease obligations Total Debt 239.7 168.9 Long-Term Assets Land Buildings Equipment Less accumulated depreciation Net property, plant, and equipment Goodwill Other long-term assets Total long-term assets (56.1) (52.5) Deferred taxes 22.8 22.2 239.1 200.7 60.0 63.0 42.0 362.1 242.7 Other long-term liabilities Total long-term liabilities 262.5 191.1 Total liabilities 406.5 323.1 Stockholders' Equity 126.6 63.6 Total liabilities and Stockholders' Equity Total Assets 533.1 386.7 533.1 386.7 2008 578.3 (481.9) 96.4 Luther Corporation Consolidated Income Statement Year ended December 31 (in $ millions) 2009 Total sales 610.1 Cost of sales (500.2) Gross profit 109.9 Selling, general, and administrative expenses (40.5) Research and development (24.6) Depreciation and amortization (3.6) Operating income 41.2 Other income Earnings before interest and taxes (EBIT) 41.2 Interest income (expense) (25.1) Pre-tax income 16.1 Taxes (5.5) Net income 10.6 (39.0) (22.8) (3.3) 31.3 31.3 (15.8) 15.5 (5.3) 10.2 Price per share (market) Shares outstanding (millions) Stock options outstanding (millions) $16 10.2 0.3 $15 8.0 0.2 126.6 63.6 Stockholders' Equity Total Liabilities and Stockholders' Equity 533.1 386.7 a) What is Luther's quick ratio in 2008? (3 points) b) What is Luther's inventory days in 2009? (3 points) c) The manager projects that the total sales in 2010 will follow the same growth rate as the previous year and that the company can maintain the same net profit margin as in 2009. What is the projected net income in 2010? (3 points) d) The manager uses the projected earnings from (c) and the average price-to-earnings ratios in 2008 and 2009 as the multiples to project the stock price in 2010. Assuming that in 2010 the company will have the same number of shares outstanding as in 2009, what will be the projected price per share? (3 points)
