Problem #1: Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash $ 10,000 Accounts payable $30,000 Receivables 50,000 Other current liabilities 20,000 Inventories 150,000 Long-term debt 50,000 Net fixed assets 90,000 Common equity 200,000 Total assets $300,000 Total liabilities and equity $300,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting sales or net income. If inventories are sold off and not replaced (thus reducing the current ratio to 2.5x), if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if no other changes occur, by how much will the ROE change? What will be the firm's new quick ratio? Problem #2: 2008 2007 Cash Accounts receivable Inventories Total current assets Net fixed assets Total assets $102,850 103,365 38,444 $244,659 67,165 $311,824 $ 89,725 85,527 34,982 $210,234 42436 $252,670 Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity Total liabilities and equity $ 30,761 30,477 16,717 $ 77,955 76,264 $154,219 100,000 57,605 $157,605 $311,824 $ 23,109 22,656 14,217 $ 59,982 63,914 $123896 90,000 38,774 $128,774 $252,670 a. Sales for 2008 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40%, and Laiho pays 40% of its net income in dividends. Given this information, construct the firm's 2008 income statement