Project #26688 - Financial Management

1. Construct a pro forma income statement for the first year and second year for the following assumptions:

  • Units of Sales in Year 1: 110,000
  • Price per Unit: $11
  • Variable cost per unit: 30%
  • Fixed Costs: $125,000
  • Income taxes: 15%
  • Interest Expense: $200,000
  • In year 2, Price per unit increases to $11.50, and unit of sales increases by 5%, all other assumptions remain the same.

2. Calculate the sustainable growth based on the following information:

• Earnings after taxes = $35,000
• Equity = $100,000
• d=22.4%

3. Calculate a table of interest rates for 5 years based on the following information:

  • The pure interest rate is 2%
  • Inflation expectations for year 1 = 3%, year 2 =4%, years 3-5 =5%
  • The default risk is .1% for year one and increases by .1% over each year
  • Liquidity premium is 0 for year 1 and increases by .2% each year
  • Maturity risk premium is 0 for years 1 and 2 and .3% for years 3-5

4. Tribke Enterprises collected the following data from its financial reports for 2012:
Stock price                                               $18.37
Inventory balance                                    $300,000
Expenses (excluding COGS)                   $1,120,000
Shares outstanding                                  290,000
Average issue price of shares                 $5.00
Gross margin %                                       40%
Interest rate                                              8%
TIE ratio                                                    8
Inventory turnover                                    12 x
Current ratio                                             1.5
Quick ratio                                                .75
Fixed asset turnover                                1.5

Complete the following abbreviated financial statements, and calculate per share ratios indicated. (Hint: Start by subtracting the formula for the quick ratio from that for the current ratio and equating that to the numerical difference.)

Set up an income statement that includes revenue, COGS, GM, EBIT, EBT, and EAT. Set up a balance sheet that includes Current assets, Fixed assets, Total assets, current liabilities, long-term debt, Equity (paid in capital*, and retained earnings), total equity, and total liabilities & equity.

*Paid-in capital = Common Stock + Paid-in Excess

Subject Business
Due By (Pacific Time) 04/06/2014 12:00 am
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