Use the following financial statements to answer parts a through k:

a$.$ What is the firm$$s profit margin in $2022?$

b$.$ What is the firm$$s sales growth from $2021$ to $2022?$

c$.$ What is the firm$$s NOWC in $2022?$ Assume the firm has no excess cash.

d$.$ What is the firm$$s Change in NOWC in $2022?$

e$.$ What is the firm$$s ROA in $2022?$

f$.$ What is the firm$$s debt to equity ratio in $2022?$ Use total liability for debt

g$.$ What is the firm$$s NOPAT in $2022?$

h$.$ What is the firm$$s FCF in $2022?$

i$.$ What is the firm$$s quick ratio in $2022?$

j$.$ What is the firm$$s addition to retained earnings in $2022?$

k$.$ What is the firm$$s POR $($payout ratio$)$ in $2022?$

Balance Sheet $($Millions of $$)$

Assets $20212022$ Liabilities and Equity $20212022$

Cash and securities $$4,100$ $$4,200$ Accounts payable $$27,315$ $$27,531$

Accounts receivable $17,00017,500$ Accruals $13,00012,369$

Inventories $19,70020,300$ Notes payable $4,5005,000$

Total current assets $$40,800$ $$42,000$ Total current liabilities $$44,815$ $$44,900$

Net plant and

equipment $$26,795$ $$28,000$

Total assets $$67,595$ $$70,000$ Long$-$term bonds $$9,000$ $$9,000$

Total liabilities $$53,815$ $$53,900$

Tax rate $25\%$ Common stock $$3,865$ $$3,865$

Retained earnings $9,91512,235$

Total common equity $$13,780$ $$16,100$

Total liabilities and equity $$67,595$ $$70,000$

Income Statement $($Millions of $$)20212022$

Net sales $$106,000$ $$112,000$

Operating costs except depreciation $101,550104,160$

Depreciation $1,9802,240$

Earnings before interest and taxes $($EBIT$)$ $$2,470$ $$5,600$

Less interest $810840$

Earnings before taxes $($EBT$)$ $$1,660$ $$4,760$

Taxes $4151,190$

Net income $$1,245$ $$3,570$

Page $2$ of $4$

$2.$ Last year, ABC firm borrowed $$150,000$ from XYZ bank. The fixed rate loan was amortized over

$5$ years with monthly payments. The interest rate was $8\%.$

a$.$ What was the required monthly payment?

b$.$ Today $(12$ months after the start of the loan$),$ the market interest rate has dropped

significantly, and ABC would like to refinance. How much does ABC need to pay the

original lender to pay off the original loan?

c$.$ Because interest paid is tax deductible, help ABC determine how much in total interest it

paid over the past $12$ months. $($Bonus$)$

d$.$ What is the EAR of this loan?

$3.$ Happy Firm issued $$10$ million worth of bonds $3$ years ago at a coupon rate $=5\%$ with par value

$=$ $$1,000.$ The term of the bond was $10$ years. The bond is currently trading at $$1,150.$

Happy Firm just reported FCF of $$4\mathrm{.}775$ million. The beta of the firm is $1\mathrm{.}2,$ the risk$-$free rate is

$2\%,$ the market risk premium is $5\%.$ The firm has $2$ million shares. The firm just paid dividends

of $$2\mathrm{.}5$ per share. The firm is expecting its FCF and dividends to grow at a constant rate of $4\%$

indefinitely.

The tax rate of the company is $25\%.$

The company would like to invest in another project today that costs $$6$ million.

a$.$ What would be the before$-$tax cost of debt for a new bond today?

b$.$ What is the firm$$s cost of equity using CAPM?

c$.$ Using the cost of equity calculated in part b$,$ what should the price per share of Happy

Firm be$?$

d$.$ Using the cost of equity calculated in part b$,$ what is the value of operations? $($answer in

millions$)($Bonus$)$

e$.$ What is the firm$$s current WACC?

$4.$ Trudy Corp has $2$ potential projects, Project A and Project B$.$ The firm has a WACC $=7\%.$ The

cash flows from year $0$ year $4$ for each of the $2$ projects are listed below:

Project A: $-375,140,100,120,90$

Project B: $-40,1\mathrm{.}5,20,40,1\mathrm{.}4$

a$.$ What is the NPV of project A$?$

b$.$ What is the IRR of project A$?$

c$.$ What is the MIRR of project A$?$

d$.$ If the projects are mutually exclusive, which project should Trudy choose?

e$.$ What is the crossover point for Project A and B$?$

f$.$ If the projects are NOT mutually exclusive, which project$($s$)$ should Trudy choose?

$5.$ Assume there are $5$ possible states of economy this coming year. The expected return for Project

C and the probabilities for each of the states are as follows:

All possible states of the

economy

Probability for each state Expected return for Project C

for each state

Depression $1\%-30\%$

Recession $12\%-5\%$

Low growth $55\%4\%$

Mid growth $25\%12\%$