Question
Project 1: Financial Statement Analysis Instruction: Students will work on the following project in groups and complete the project using Excel spreadsheet. Bob Builder Construction
Project 1: Financial Statement Analysis
Instruction: Students will work on the following project in groups and complete the project using Excel spreadsheet.
Bob Builder Construction Company (BBCC) is a large firm for kitchen appliance manufacturers. Peral, the finance manager of BBCC, submitted a justification to support the application for a short-term loan from the Queensville Interstate Bank (QIB) to finance increased sales. The consolidated income statement and balance sheet of BBCC are as follows.
BBCC Income Statement for 2018 and 2019 (thousand dollars)
2018 | 2019 | |
Sales | $40,909 | $45,000 |
Cost of Goods Sold | $20,909 | $23,000 |
Gross Profit | $20,000 | $22,000 |
Selling and Administrative Expenses | $11,818 | $13,000 |
Depreciation Expense | $2,000 | $3,000 |
Operating Income (EBIT) | $6,182 | $6,000 |
Interest Expense | $400 | $412 |
Earnings before Taxes (EBT) | $5,782 | $5,588 |
Income Taxes (@ 40%) | $2,313 | $2,235 |
Net Income (NI) | $3,469 | $3,353 |
Dividends Paid (@ 21.86%) | $758 | $733 |
BBCC Balance Sheet as of End of 2018 and 2019 (thousand dollars)
2018 | 2019 | |
Assets: |
|
|
Cash | $2,000 | $1,800 |
Accounts Receivable (net) | $6,000 | $7,600 |
Inventory | $5,000 | $5,220 |
Plant and Equipment (gross) | $26,000 | $31,000 |
Less: Accumulated Depreciation | $10,000 | $13,000 |
Plant and Equipment (net) | $16,000 | $18,000 |
Land | $1,000 | $1,000 |
Liabilities: | ||
Accounts Payable | $2,000 | $2,600 |
Notes Payable | $3,000 | $3,300 |
Accrued Expenses | $3,000 | $3,100 |
Bonds Payable | $4,000 | $4,000 |
Stockholders Equity: | ||
Common Stock | $4,000 | $4,000 |
Retained Earnings | $14,000 | $16,620 |
2. Calculate the EVA and MVA for BBCC, assuming that the firms income tax rate is 40 percent, the weighted average rate of return expected by the suppliers of the firms capital is 10 percent, and the market price of the firms stock is $20. There are 1.2 million shares outstanding.
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