see the following information about XYZ Plumbing (FY=12/31), a public company with the most recent closing stock price of $4.50, to answer the following three problems:
XYZ Plumbing - Income Statement
answers in the yellow box
XYZ Plumbing - Balance Sheet 2017 2018 2017 2018 ASSETS Cash A/R Inventory Pre-paid expenses Total Current Assets 1,500,000 1,000,000 2,000,000 500,000 5,000,000 1,500,000 1,500,000 2,300,000 600,000 5,900,000 LIABILITIES Accounts Payable Notes Payable Current portion of LTD Accrued Liabilities Total Current Liabilities 1,800,000 1,500,000 1,000,000 700,000 5,000,000 2,000,000 1,500,000 1,000,000 1,520,000 6,020,000 Long-Term Debt 9,000,000 10,000,000 Building and Improvements Equipment 15,000,000 5,000,000 20,000,000 15,000,000 5,000,000 20,000,000 Depreciation Net PP&E 500,000 19,500,000 1,000,000 19,000,000 Stockholder's Equity Common Stock at Par Paid in Capital Retained Earnings Total Stockholder's Equity 100,000 9,900,000 500,000 10,500,000 100,000 9,900,000 2,275,525 12,275,525 Total Assets 24,500,000 24,900,000 Total Liabilities + Equity 24,500,000 28,295,525 (3 395 525) Diluted Shares Diluted Shares Information Officers and Directors Options Exercise Price 3,000,000 US$ 1.00 Publice Warrants Exercise Price 2,500,000 US$ 4.00 Stock Price used for calculating Diluted Shares US$ 4.50 Diluted Shares Calculation Table Basic Shares 10,000,000 O&D warrants Public Total 10,000,000 Proceeds Officers and Directors Public Shareholders Total Proceeds Buyback Price Total Shares repurchased US$ 4.50 Diluted Shares PROBLEM SOLVING Problem 1 Statement of Cash Flows 2018 Net Income Adjustments Depreciation and amortization Cash Provided by Operating Assets and Liabilities Accounts Receivable Inventories Pre-paid expenses Accounts payable Accrued liabilities Net Cash provided (used) by operating activities Cash Provided from Investing Activities Additions to property, plant and equipment Net Cash provided (used) by investing activities Cash Provided from Financing Activities Additions to long term borrowing Addition to short term borrowing Net Cash provided (used) by financing activities Net Cash Flow Problem 2 Analysis 2018 Current Ratio Quick Ratio Gross Margin Operating Margin Accounts Receivable turnover Inventory turnover Total asset turnover Debt to Equity Return on Equity Problem 3 Projections 2019E Revenue (Increase of 25% from 2018) CGS Gross Profit (Gross Margin increases by 0.05% from 2018) SG&A (Improves by 1.0% from 2018) R&D (Increases by 10% in total dollars from 2018) Deprec & Amort (no change from 2018) Total Op. Expense Operating Profit Interest cost (given) Interest income (given) US$ US$ 875,000 80,000 Pre-Tax Tax (21% rate) Net Income EPS - Basic EPS - Diluted (See Information sheet for Equity Structure) XYZ Plumbing - Balance Sheet 2017 2018 2017 2018 ASSETS Cash A/R Inventory Pre-paid expenses Total Current Assets 1,500,000 1,000,000 2,000,000 500,000 5,000,000 1,500,000 1,500,000 2,300,000 600,000 5,900,000 LIABILITIES Accounts Payable Notes Payable Current portion of LTD Accrued Liabilities Total Current Liabilities 1,800,000 1,500,000 1,000,000 700,000 5,000,000 2,000,000 1,500,000 1,000,000 1,520,000 6,020,000 Long-Term Debt 9,000,000 10,000,000 Building and Improvements Equipment 15,000,000 5,000,000 20,000,000 15,000,000 5,000,000 20,000,000 Depreciation Net PP&E 500,000 19,500,000 1,000,000 19,000,000 Stockholder's Equity Common Stock at Par Paid in Capital Retained Earnings Total Stockholder's Equity 100,000 9,900,000 500,000 10,500,000 100,000 9,900,000 2,275,525 12,275,525 Total Assets 24,500,000 24,900,000 Total Liabilities + Equity 24,500,000 28,295,525 (3 395 525) Diluted Shares Diluted Shares Information Officers and Directors Options Exercise Price 3,000,000 US$ 1.00 Publice Warrants Exercise Price 2,500,000 US$ 4.00 Stock Price used for calculating Diluted Shares US$ 4.50 Diluted Shares Calculation Table Basic Shares 10,000,000 O&D warrants Public Total 10,000,000 Proceeds Officers and Directors Public Shareholders Total Proceeds Buyback Price Total Shares repurchased US$ 4.50 Diluted Shares PROBLEM SOLVING Problem 1 Statement of Cash Flows 2018 Net Income Adjustments Depreciation and amortization Cash Provided by Operating Assets and Liabilities Accounts Receivable Inventories Pre-paid expenses Accounts payable Accrued liabilities Net Cash provided (used) by operating activities Cash Provided from Investing Activities Additions to property, plant and equipment Net Cash provided (used) by investing activities Cash Provided from Financing Activities Additions to long term borrowing Addition to short term borrowing Net Cash provided (used) by financing activities Net Cash Flow Problem 2 Analysis 2018 Current Ratio Quick Ratio Gross Margin Operating Margin Accounts Receivable turnover Inventory turnover Total asset turnover Debt to Equity Return on Equity Problem 3 Projections 2019E Revenue (Increase of 25% from 2018) CGS Gross Profit (Gross Margin increases by 0.05% from 2018) SG&A (Improves by 1.0% from 2018) R&D (Increases by 10% in total dollars from 2018) Deprec & Amort (no change from 2018) Total Op. Expense Operating Profit Interest cost (given) Interest income (given) US$ US$ 875,000 80,000 Pre-Tax Tax (21% rate) Net Income EPS - Basic EPS - Diluted (See Information sheet for Equity Structure)
