The Saxton Company

SAXTON COMPANY

Income Statement

For the Year Ended December 31, 2009

Sales (all on credit) ..................................................................... $ 4,000,000

Cost of Goods Sold...........................................................................3,000,000

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Gross Profit.....................................................................................$ 1,000,000

Selling and Administrative Expenses...........................................450,000

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Operating Profit ..............................................................................$550,000

Interest Expense..............................................................................50,000

Extraordinary Loss............................................................................200,000

Earnings Before Taxes.....................................................................$300,000

Income Taxes (33%).........................................................................100,000

Net Income........................................................................................$ 200,000

SAXTON COMPANY

Balance Sheet

As of December 31, 2009

Assets

Cash....................................................................................... $30,000

Accounts Receivable...........................................................350,000

Marketable Securities ........................................................50,000

Inventory...............................................................................370,000

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Total Current Assets............................................................. $ 800,000

Net Plant and Equipment.....................................................800,000

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Total Assets............................................................................$ 1,600,000

Liabilities and Stockholders' Equity

Accounts Payable....................................................................$50,000

Notes Payable..........................................................................250,000

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Total Current Liabilities...........................................................$ 300,000

Long Term Liabilities.................................................................. 300,000

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Total Liabilities ..........................................................................$ 600,000

Common Stock............................................................................ 400,000

Retained Earnings....................................................................... 600,000

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Total Stockholders' Equity.......................................................$ 1,000,000

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1. Perform Ratio Analysis for the entity. Compute each ratio under the four key categories referenced in class. In addition to computing the ratios under the four key categories, perform DuPont Analysis as appropriate (i.e. for ROA and ROE).

2. Determine a value for this entity using Net Income as a Perpetuity and ROE and the % Discount Rate.