公司理财CorporateFinance第九版CASE答案

1、c-45 case solutionscase solutionsfundamentals of corporate financeross, westerfield, and jordan9th editionchapter 2 c-5 chapter 1the mcgee cake company1.the advantages to a llc are: 1) reduction of personal liability. a sole proprietor has unlimited liability, which can include the potential loss of

2、 all personal assets. 2) taxes. forming an llc may mean that more expenses can be considered business expenses and be deducted from the companys income. 3) improved credibility. the business may have increased credibility in the business world compared to a sole proprietorship. 4) ability to attract

3、 investment. corporations, even llcs, can raise capital through the sale of equity. 5) continuous life. sole proprietorships have a limited life, while corporations have a potentially perpetual life. 6) transfer of ownership. it is easier to transfer ownership in a corporation through the sale of st

4、ock.the biggest disadvantage is the potential cost, although the cost of forming a llc can be relatively small. there are also other potential costs, including more expansive record-keeping.2.forming a corporation has the same advantages as forming a llc, but the costs are likely to be higher.3.as a

5、 small company, changing to a llc is probably the most advantageous decision at the current time. if the company grows, and doc and lyn are willing to sell more equity ownership, the company can reorganize as a corporation at a later date. additionally, forming a llc is likely to be less expensive t

6、han forming a corporation.chapter 2cash flows and financial statements at sunset boardsbelow are the financial statements that you are asked to prepare.1.the income statement for each year will look like this:income statement20082009 sales$247,259$301,392 cost of goods sold126,038159,143&#

7、160;selling & administrative24,78732,352 depreciation35,58140,217 ebit$60,853$69,680 interest7,7358,866 ebt$53,118$60,814 taxes10,62412,163 net income$42,494$48,651 dividends$21,247$24,326 addition to retained earnings21,24724,3262.the balance sheet for ea

8、ch year will be: balance sheet as of dec. 31, 2008 cash$18,187   accounts payable $32,143 accounts receivable12,887   notes payable 14,651 inventory27,119   current liabilities $46,794 current assets$58,193      

9、60; long-term debt $79,235 net fixed assets$156,975   owners' equity 89,139 total assets$215,168   total liab. & equity $215,168in the first year, equity is not given. therefore, we must calculate equity as a plug variable. since total liabilities & equity i

10、s equal to total assets, equity can be calculated as: equity = $215,168 46,794 79,235 equity = $89,139 balance sheet as of dec. 31, 2009 cash$27,478   accounts payable $36,404 accounts receivable16,717   notes payable 15,997 inventory37,216   current

11、 liabilities $52,401 current assets$81,411        long-term debt $91,195 net fixed assets$191,250   owners' equity 129,065 total assets$272,661   total liab. & equity $272,661the owners equity for 2009 is the beginning of

12、year owners equity, plus the addition to retained earnings, plus the new equity, so:equity = $89,139 + 24,326 + 15,600equity = $129,0653.using the ocf equation:ocf = ebit + depreciation taxesthe ocf for each year is:ocf2008 = $60,853 + 35,581 10,624 ocf2008 = $85,180ocf2009 = $69,680 + 40,217 12,163

13、 ocf2009 = $97,7344.to calculate the cash flow from assets, we need to find the capital spending and change in net working capital. the capital spending for the year was:capital spending ending net fixed assets$191,250  beginning net fixed assets156,975 + depreciation40,217  net

14、capital spending$74,492and the change in net working capital was: change in net working capital ending nwc$29,010  beginning nwc 11,399  change in nwc$17,611so, the cash flow from assets was: cash flow from assets operating cash flow$97,734  net capital spending74,

15、492  change in nwc 17,611  cash flow from assets$ 5,6315.the cash flow to creditors was: cash flow to creditors  interest paid $8,866   net new borrowing 11,960   cash flow to creditors $3,0946.the cash flow to stockholders was: cash flow to stockholders 

16、 dividends paid $24,326   net new equity raised15,600   cash flow to stockholders$8,726answers to questions1.the firm had positive earnings in an accounting sense (ni > 0) and had positive cash flow from operations. the firm invested $17,611 in new net working capital and $74,492 i

17、n new fixed assets. the firm gave $5,631 to its stakeholders. it raised $3,094 from bondholders, and paid $8,726 to stockholders.2.the expansion plans may be a little risky. the company does have a positive cash flow, but a large portion of the operating cash flow is already going to capital spendin

18、g. the company has had to raise capital from creditors and stockholders for its current operations. so, the expansion plans may be too aggressive at this time. on the other hand, companies do need capital to grow. before investing or loaning the company money, you would want to know where the curren

19、t capital spending is going, and why the company is spending so much in this area already.chapter 3 c-9 chapter 3ratios analysis at s&s air1.the calculations for the ratios listed are:current ratio = $2,186,520 / $2,919,000 current ratio = 0.75 timesquick ratio = ($2,186,250 1,037,120) / $2,919,

20、000 quick ratio = 0.39 timescash ratio = $441,000 / $2,919,000 cash ratio = 0.15 timestotal asset turnover = $30,499,420 / $18,308,920 total asset turnover = 1.67 timesinventory turnover = $22,224,580 / $1,037,120 inventory turnover = 21.43 timesreceivables turnover = $30,499,420 / $708,400 receivab

21、les turnover = 43.05 timestotal debt ratio = ($18,308,920 10,069,920) / $18,308,920 total debt ratio = 0.45 timesdebt-equity ratio = ($2,919,000 + 5,320,000) / $10,069,920 debt-equity ratio = 0.82 timesequity multiplier = $18,308,920 / $10,069,920 equity multiplier = 1.82 timestimes interest earned

22、= $3,040,660 / $478,240 times interest earned = 6.36 timescash coverage = ($3,040,660 + 1,366,680) / $478,420 cash coverage = 9.22 timesprofit margin = $1,537,452 / $30,499,420 profit margin = 5.04%return on assets = $1,537,452 / $18,308,920 return on assets = 8.40%return on equity = $1,537,452 / $1

23、0,069,920 return on equity = 15.27% 2. boeing is probably not a good aspirant company. even though both companies manufacture airplanes, s&s air manufactures small airplanes, while boeing manufactures large, commercial aircraft. these are two different markets. additionally, boeing is heavily in

24、volved in the defense industry, as well as boeing capital, which finances airplanes. bombardier is a canadian company that builds business jets, short-range airliners and fire-fighting amphibious aircraft and also provides defense-related services. it is the third largest commercial aircraft manufac

25、turer in the world. embraer is a brazilian manufacturer than manufactures commercial, military, and corporate airplanes. additionally, the brazilian government is a part owner of the company. bombardier and embraer are probably not good aspirant companies because of the diverse range of products and

26、 manufacture of larger aircraft.cirrus is the world's second largest manufacturer of single-engine, piston-powered aircraft. its sr22 is the world's best selling plane in its class. the company is noted for its innovative small aircraft and is a good aspirant company. cessna is a well known

27、manufacturer of small airplanes. the company produces business jets, freight- and passenger-hauling utility caravans, personal and small-business single engine pistons. it may be a good aspirant company, however, its products could be considered too broad and diversified since s&s air produces o

28、nly small personal airplanes.3.s&s is below the median industry ratios for the current and cash ratios. this implies the company has less liquidity than the industry in general. however, both ratios are above the lower quartile, so there are companies in the industry with lower liquidity ratios

29、than s&s air. the company may have more predictable cash flows, or more access to short-term borrowing. if you created an inventory to current liabilities ratio, s&s air would have a ratio that is lower than the industry median. the current ratio is below the industry median, while the quick

30、 ratio is above the industry median. this implies that s&s air has less inventory to current liabilities than the industry median. s&s air has less inventory than the industry median, but more accounts receivable than the industry since the cash ratio is lower than the industry median.the tu

31、rnover ratios are all higher than the industry median; in fact, all three turnover ratios are above the upper quartile. this may mean that s&s air is more efficient than the industry.the financial leverage ratios are all below the industry median, but above the lower quartile. s&s air genera

32、lly has less debt than comparable companies, but still within the normal range.the profit margin, roa, and roe are all slightly below the industry median, however, not dramatically lower. the company may want to examine its costs structure to determine if costs can be reduced, or price can be increa

33、sed.overall, s&s airs performance seems good, although the liquidity ratios indicate that a closer look may be needed in this area. below is a list of possible reasons it may be good or bad that each ratio is higher or lower than the industry. note that the list is not exhaustive, but merely one

34、 possible explanation for each ratio.ratiogoodbadcurrent ratiobetter at managing current accounts.may be having liquidity problems.quick ratiobetter at managing current accounts.may be having liquidity problems.cash ratiobetter at managing current accounts.may be having liquidity problems.total asse

35、t turnoverbetter at utilizing assets.assets may be older and depreciated, requiring extensive investment soon.inventory turnoverbetter at inventory management, possibly due to better procedures.could be experiencing inventory shortages.receivables turnoverbetter at collecting receivables.may have cr

36、edit terms that are too strict. decreasing receivables turnover may increase sales.total debt ratioless debt than industry median means the company is less likely to experience credit problems.increasing the amount of debt can increase shareholder returns. especially notice that it will increase roe

37、.debt-equity ratioless debt than industry median means the company is less likely to experience credit problems.increasing the amount of debt can increase shareholder returns. especially notice that it will increase roe.equity multiplierless debt than industry median means the company is less likely

38、 to experience credit problems.increasing the amount of debt can increase shareholder returns. especially notice that it will increase roe.tiehigher quality materials could be increasing costs.the company may have more difficulty meeting interest payments in a downturn.cash coverageless debt than in

39、dustry median means the company is less likely to experience credit problems.increasing the amount of debt can increase shareholder returns. especially notice that it will increase roe.profit marginthe pm is slightly below the industry median. it could be a result of higher quality materials or bett

40、er manufacturing.company may be having trouble controlling costs.roacompany may have newer assets than the industry.company may have newer assets than the industry.roelower profit margin may be a result of higher quality.profit margin and em are lower than industry, which results in the lower roe.ch

41、apter 4 c-13 chapter 4planning for growth at s&s air1.to calculate the internal growth rate, we first need to find the roa and the retention ratio, so:roa = ni / ta roa = $1,537,452 / $18,309,920 roa = .0840 or 8.40%b = addition to re / ni b = $977,452 / $1,537,452 b = 0.64now we can use the int

42、ernal growth rate equation to get:internal growth rate = (roa × b) / 1 (roa × b)internal growth rate = 0.0840(.64) / 1 0.0840(.64) internal growth rate = .0564 or 5.64%to find the sustainable growth rate, we need the roe, which is:roe = ni / te roe = $1,537,452 / $10,069,920 roe = .1527 or

43、 15.27%using the retention ratio we previously calculated, the sustainable growth rate is:sustainable growth rate = (roe × b) / 1 (roe × b)sustainable growth rate = 0.1527(.64) / 1 0.1527(.64) sustainable growth rate = .1075 or 10.75%the internal growth rate is the growth rate the company

44、can achieve with no outside financing of any sort. the sustainable growth rate is the growth rate the company can achieve by raising outside debt based on its retained earnings and current capital structure.2.pro forma financial statements for next year at a 12 percent growth rate are: income s

45、tatement    sales $ 34,159,350     cogs 24,891,530    other expenses 4,331,600    depreciation 1,366,680     ebit $ 3,569,541     interest 478,240     taxable i

46、ncome $ 3,091,301    taxes (40%) 1,236,520     net income $ 1,854,780           dividends $ 675,583     add to re 1,179,197    balance sheet assets liabilities

47、& equity current assets  current liabilities   cash $ 493,920   accounts payable $ 995,680   accounts rec. 793,408  notes payable 2,030,000   inventory 1,161,574  total cl $ 3,025,680   total ca $ 2,448,902      

48、; long-term debt $ 5,320,000        shareholder equity      common stock $ 350,000  fixed assets   retained earnings 10,899,117  net pp&e$ 18,057,088   total equity $ 11,249,117     

49、;   total assets $ 20,505,990  total l&e $ 19,594,787 so, the efn is:efn = total assets total liabilities and equityefn = $20,505,990 19,594,797 efn = $911,193the company can grow at this rate by changing the way it operates. for example, if profit margin increases, say by re

50、ducing costs, the roe increases, it will increase the sustainable growth rate. in general, as long as the company increases the profit margin, total asset turnover, or equity multiplier, the higher growth rate is possible. note however, that changing any one of these will have the effect of changing

51、 the pro forma financial statements.3.now we are assuming the company can only build in amounts of $5 million. we will assume that the company will go ahead with the fixed asset acquisition. to estimate the new depreciation charge, we will find the current depreciation as a percentage of fixed asset

52、s, then, apply this percentage to the new fixed assets. the depreciation as a percentage of assets this year was:depreciation percentage = $1,366,680 / $16,122,400depreciation percentage = .0848 or 8.48%the new level of fixed assets with the $5 million purchase will be:new fixed assets = $16,122,400

53、 + 5,000,000 = $21,122,400so, the pro forma depreciation will be:pro forma depreciation = .0848($21,122,400) pro forma depreciation = $1,790,525 we will use this amount in the pro forma income statement. so, the pro forma income statement will be: income statement    sales $

54、 34,159,350     cogs 24,891,530    other expenses 4,331,600    depreciation 1,790,525     ebit $ 3,145,696     interest 478,240     taxable income $ 2,667,456   

55、0;taxes (40%) 1,066,982     net income $ 1,600,473           dividends $ 582,955    add to re 1,017,519   the pro forma balance sheet will remain the same except for the fixed asset and equity ac

56、counts. the fixed asset account will increase by $5 million, rather than the growth rate of sales.  balance sheet assets liabilities & equity current assets  current liabilities   cash $ 493,920   accounts payable $ 995,680   accounts rec. 793,40

57、8  notes payable 2,030,000   inventory 1,161,574  total cl $ 3,025,680   total ca $ 2,448,902       long-term debt $ 5,320,000        shareholder equity      common stock $ 350,000  fixed assets   retained earnings 10,737,439  net pp&e$ 21,122,400  total equity $ 11,087,439        total assets $ 23,571,302  total l&e $ 19,433,119 so, the efn is:efn = total assets