Question 1

The following is a comparative balance sheet for a firm for fiscal year 2015 (in millions of dollars): [1.5+1.5+3+2+1] 2015	2014	2015	2014
Operating cash	60	50	Accounts payable	1,200	1,040
Short-term investments (at market)	550	500	Accrued liabilities	390	450
Accounts receivable	940	790	Long-term debt	1,840	1,970
Inventory	910	840
Property and plant	2,840	2,710	Common equity	1,870	1,430
5,300	4,890	5,300	4,890 All questions in attached file

Affix Date Stamp Here SEM/TRI 1, 2016 ASSIGNMENT COVER SHEET Name: Student ID Name: Student ID Name: Student ID Name: Student ID (If the given name by which your tutor knows you, differs from your name on University records, please indicate BOTH names) Unit Name & Number: _______________________________ __________ Tutor: Day & Time of Tutorial: Your assignment should meet the following requirements. Please confirm this (by ticking boxes) before submitting your assignment. Date Stamp affixed above Pages have been consecutively numbered and identified A copy of the assignment has been retained by me Declaration below is complete Declaration Except where we have indicated, the work we are submitting in this assignment is our own work and has not been submitted for assessment in another Unit or course. We warrant that our group members contributed equally for the assignment ___________________________________________________________________ (Signature of students) Question 1 The following is a comparative balance sheet for a firm for fiscal year 2015 (in millions of dollars): [1.5+1.5+3+2+1] Operating cash Short-term investments (at market) Accounts receivable Inventory Property and plant 2015 60 2014 50 550 500 940 910 2,840 5,300 790 840 2,710 4,890 Accounts payable 2015 1,200 2014 1,040 Accrued liabilities 390 450 Long-term debt 1,840 1,970 Common equity 1,870 5,300 1,430 4,890 The following is the statement of common shareholders' equity for 2015 (in millions of dollars): Balance, end of fiscal year 2014 Share issues from exercised employee stock options Repurchase of 24 million shares Cash dividend Tax benefit from exercise of employee stock options Unrealized gain on investments Net income Balance, end of fiscal year 2015 1,430 810 (720) (180) 12 50 468 1,870 The firm's income tax rate is 35%. The firm reported $15 million in interest income and $98 million in interest expense for 2015. Sales revenue was $3,726 million. a. Calculate the loss to shareholders from the exercise of employee stock options during 2015. b. The shares repurchased were in settlement of a forward purchase agreement. The market price of the shares at the time of the repurchase was $25 each. What was the effect of this transaction on the income for the shareholders? c. Prepare a comprehensive income statement that distinguishes after-tax operating income from financing income and expense. Include gains or losses from the transactions in questions (a) and (b) above. d. Prepare a reformulated comparative balance sheet that distinguishes assets and liabilities employed in operations from those employed in financing activities. Calculate the firms' financial leverage and operating liability leverage at the end of 2015. e. Calculate free cash flow for 2015. Question 2 The following is from the statement of shareholders' equity for Intel Corporation for 2015 (in millions of dollars). Intel faces a 38% tax rate. [3] Balance, December 25, 2014 32,535 Net income 10,535 Unrealized loss on available-for-sale securities (3,596) Issuance of shares through employee stock plans, net of tax benefit of $887 1,684 million Reclassification of put warrant obligation 130 Amortization of unearned compensation 26 Conversion of subordinated notes to common stock (market value of stock 207 was $350 million) Repurchase of common stock Cash dividends Issuance of shares for acquisitions (4,007) (470) 278 37,322 Calculate comprehensive income to Intel's shareholders for 2015, being sure to include any hidden dirty surplus expenses. Question 3 Below are some summary numbers for a firm for fiscal years 2014 and 2015 (in millions of dollars). [3+2] 2014 Sales Operating income (after tax) Net financial expense (after tax) Comprehensive income Average net operating assets Average common equity (a) 2015 12,257 12,867 858 56 802 772 98 674 4,903 3,503 4,949 2,149 Calculate return on common equity (ROCE), return on net operating assets (RNOA), and net borrowing cost (NBC) for the two years. (b) How much of the change in ROCE over the two years is due to: (I) (II) (III) (IV) Change in profit margin Change in asset turnover Change in financial leverage Change in borrowing costs? Question 4 The following are summary income statement and balance sheet numbers for a firm (in millions of dollars). The firm has a required return for operations of 9%. [5+2+1] 2012 Sales Core operating expenses Core operating income Unusual operating income 2013 Net financial expense Comprehensive income 1,906 1,773 133 -----133 7 126 1,985 1,846 139 ----139 8 131 Net operating assets Net financial obligations Common equity 945 150 795 983 155 828 2014 2015 2,064 1,919 145 (45) 100 8 92 2,147 1,997 150 60 210 9 201 1,022 175 847 1,063 120 943 (a) Prepare a table giving the following for 2013- 2015. Use beginning-of-period balance sheet numbers in denominators. Return on common equity (ROCE) Return on net operating assets (RNOA) Core return on net operating assets (Core RNOA) Free cash flow Net payments to common shareholders Net payments to net debt holders Asset turnover Core profit margin Growth rate for net operating assets (b) On the basis of these financial statements, forecast (i) Residual operating income for 2016 and 2017. (ii) Abnormal operating income growth for 2017