Posted on

FIN 515 Managerial Finance Week 1 Problem Set 1 Answer

FIN 515 Managerial Finance Week 1 Problem Set 1 Answer

FIN 515 Managerial Finance Week 1 Problem Set 1 Answer

Week 1 Problem Set
Answer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_1_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox.
Chapter 1 (page 19)
1. What is the most important difference between a corporation and all other organizational forms?
2. What does the phrase limited liability mean in a corporate context?
3. Which organizational forms give their owners limited liability?
4. What are the main advantages and disadvantages of organizing a firm as a corporation?
5. Explain the difference between an S corporation and a C corporation.

6. Chapter 2
The following is provided for use in answering the next set of questions. You may also find table 2.5 on page 53 of your text and all questions on pages 56–57.
TABLE 2.5 2009–2013 Financial Statement Data and Stock Price Data for Mydeco Corp.
Mydeco Corp. 2009–2013 (All data as of fiscal year end; in $ million)
Income Statement 2009 2010 2011 2012 2013
Revenue
Cost of Goods Sold 404.3
(188.3) 363.8
(173.8) 424.6
(206.2) 510.7
(246.8) 604.1
(293.4)
Gross Profit
Sales and Marketing
Administration
Depreciation and Amortization 216.0
(66.7)
(60.6)
(27.3) 190.0
(66.4)
(59.1)
(27.0) 218.4
(82.8)
(59.4)
(34.3) 263.9
(102.1)
(66.4)
(38.4) 310.7
(120.8)
(78.5)
(38.6)
EBIT
Interest Income (Expense) 61.4
(33.7) 37.5
(32.9) 41.9
(32.2) 57.0
(37.4) 72.8
(39.4)
Pretax Income
Income Tax 27.7
(9.7) 4.6
(1.6) 9.7
(3.4) 19.6
(6.9) 33.4
(11.7)
Net Income
Shares outstanding (millions)
Earnings per share 18.0
55.0
$0.33 3.0
55.0
$0.05 6.3
55.0
$0.11 12.7
55.0
$0.23 21.7
55.0
$0.39
Balance Sheet 2009 2010 2011 2012 2013
Assets
Cash
Accounts Receivable
Inventory
48.8
88.6
33.7
68.9
69.8
30.9
86.3
69.8
28.4
77.5
76.9
31.7
85.0
86.1
35.3
Total Current Assets
Net Property, Plant, and Equip.
Goodwill and Intangibles 171.1
245.3
361.7 169.6
169.6
243.3 184.5
309
361.7 186.1
345.6
361.7 206.4
347.0
361.7
Total Assets
Liabilities and Stockholders’ Equity
Accounts Payable
Accrued Compensation 778.1

18.7
6.7 774.6

17.9
6.4 855.2

22.0
7.0 893.4

26.8
8.1 915.1

31.7
9.7
Total Current Liabilities
Long-term Debt 25.4
500.0 24.3
500.0 29.0
575.0 34.9
600.0 41.4
600.0
Total Liabilities
Stockholders’ Equity 525.4
252.7 524.3
250.3 604.0
251.2 634.9
258.5 641.4
273.7
Total Liabilities and Stockholders’ Equity 778.1 774.6 855.2 893.4 915.1
Statement of Cash Flows 2009 2010 2011 2012 2013
Net Income
Depreciation and Amortization
Chg. in Accounts Receivable
Chg. in Inventory
Chg. in Payables and Accrued Comp. 18.0
27.3
3.9
(2.9)
2.2 3.0
27.0
18.8
2.8
(1.1) 6.3
34.3
(0.0)
2.5
4.7 12.7
38.4
(7.1)
(3.3)
5.9 21.7
38.6
(9.2)
(3.6)
6.5
Cash from Operations
Capital Expenditures 48.5
(25.0) 50.5
(25.0) 47.8
(100.0) 46.6
(75.0) 54.0
(40.0)
Cash from Investing Activities
Dividends Paid
Sale (or purchase) of stock
Debt Issuance (Pay Down) (25.0)
(5.4)

— (25.0)
(5.4)

— (100.0)
(5.4)

75.0 (75.0)
(5.4)

25.0 (40.0)
(6.5)


Cash from Financing Activities (5.4) (5.4) 69.6 19.6 (6.5)
Change in Cash 18.1 20.1 17.4 (8.8) 7.5
Mydeco Stock Price $7.92 $3.30 $5.25 $8.71 $10.89

29. In fiscal year 2011, Starbucks Corporation (SBUX) had revenue of $11.70 billion, gross profit of $6.75 billion, and net income of $1.25 billion. Peet’s Coffee and Tea (PEET) had revenue of $372 million, gross profit of $72.7 million, and net income of $17.8 million.
• a. Compare the gross margins for Starbucks and Peet’s.
• b. Compare the net profit margins for Starbucks and Peet’s.
• c. Which firm was more profitable in 2011?

31. See Table 2.5 showing financial statement data and stock price data for Mydeco Corp.
• a. How did Mydeco’s accounts receivable days change over this period?
• b. How did Mydeco’s inventory days change over this period?
• c. Based on your analysis, has Mydeco improved its management of its working capital during this time period?

2013 2012 2011 2010 2009
a. Accounts Receivable Period (Average Accounts Receivable*365)/Sales 52.02 54.96 60.00 70.03 79.98
Sales 604.10 510.70 424.60 363.80 404.3
Average Accounts Receivable 86.10 76.90 69.80 69.80 88.6

b. Inventory days (Average Inventory*365/Sales) 43.91 46.88 50.27 64.89 65.32
Cost of Goods Sold 293.4 246.8 206.2 173.8 188.3
Average Inventory 35.3 31.7 28.4 30.9 33.7

c. Working Capital (Current assets – Current Liability) 165 151.2 155.5 145.3 145.7
Current Assets 206.4 186.1 184.5 169.6 171.1
Current Liability 41.4 34.9 29 24.3 25.4

32. See Table 2.5 showing financial statement data and stock price data for Mydeco Corp.
• a. Compare Mydeco’s accounts payable days in 2009 and 2013.
• b. Did this change in accounts payable days improve or worsen Mydeco’s cash position in 2013?

33. See Table 2.5 showing financial statement data and stock price data for Mydeco Corp.

• a. By how much did Mydeco increase its debt from 2009 to 2013?
• b. What was Mydeco’s EBITDA/Interest coverage ratio in 2009 and 2013? Did its coverage ratio ever fall below 2?
• c. Overall, did Mydeco’s ability to meet its interest payments improve or decline over this period?

42. For fiscal year 2011, Starbucks Corporation (SBUX) had total revenues of $11.70 billion, net income of $1.25 billion, total assets of $7.36 billion, and total shareholder’s equity of $4.38 billion.
• a. Calculate the Starbucks’ ROE directly, and using the DuPont Identity.
• b. Comparing with the data for Peet’s in Problem 41, use the DuPont Identity to understand the difference between the two firms’ ROEs.

For getting the instant download solution, Please click on the “PURCHASE” link below to get “FIN 515 Managerial Finance Week 1 Problem Set 1 Answer”.

For instant digital download of the above solution or tutorial, please click on the below link and make an instant purchase. You will be guided to the PAYPAL Standard payment page wherein you can pay and you will receive an email immediately with a download link.

In case you find any problem in getting the download link or downloading the tutorial, please send us an email on mail@genietutorial.com

FIN 515 Week 1 Problem set 1

Leave a Reply

Your email address will not be published. Required fields are marked *