FIN 254

ASSIGNMENT #1

SPRING 2011

ASSIGNMENT #1 DUE ON WEDNESDAY, FEBRUARY 29 NAME: SEC: ID: ______________

1. ( 15 marks) Spendit Corporation has the following incomplete balance sheet and income statement for 2008 and 2009. (Figures in millions of dollars) Spendit Corporation Balance Sheets as of December 31, 2008 and 2009 2008 2009 2008 2009 Assets: Liabilities and Owners Equity Cash $518 $600 Accounts payable $620 $707 Accounts rec. $230 $211 Notes payable $336 $270 Inventory $960 $792 Current liabilities $956 $977 Current assets $1,708 $1,603 Long-term debt $351 $65 Net fixed assets$895 $925 Shareholders Equity ? ? Total assets $2,603 $2,528 Total liabilities and Owner's equity ? ?

Income Statement, 2009 (Figures in millions of dollars) Revenue $3,500 Cost of Goods Sold $3,200 Depreciation $110 Interest Expense $40 Tax rate 25% a. What are the shareholders equities in 2008 and 2009? b. What are the values for total liabilities and owners equities in 2008 and 2009? c. What are the net working capitals in 2008 and 2009? What is the change in net working capital in 2009? d. What is the net income of Spendit Corporation in 2009? If the company has 150

FIN 254

ASSIGNMENT #1

SPRING 2011

million shares outstanding at the end of 2009, what would be the companys earnings per share (EPS)? e. What is the operating cash flow of the company in 2009? f. What is the net capital spending of the company in 2009? g. Compute the cash flows from assets of Spendit Corporation in 2009. h. During 2009, the company raised $25 million dollars of long term debt. How much long term debt have the company paid off during the year? What is the cash flow to creditors? i. What is the cash flow to shareholders? 2. Spendit Corporation had additions to retained earnings for the year just ended of $350,000. The firm paid out $160,000 in cash dividend, and it has ending total equity of $4.1 million. If the company currently has 210,000 shares of common stock outstanding, what are the earnings per share? Dividend per share? Book value per share? If the stock currently sells for $58 per share, what is the market to book ratio?(interpret your answer) The price-earning ratio?( interpret your answer) 3. You expect to receive $10,000 at graduation in two years. You plan on investing it at 10% until you have $120,000. How long will you wait from now? 4. You are scheduled to receive $30,000 in two years. When you receive it, you will invest it for six more years at 6.5% per year. How much will you have in eight years?
5. You go to Shellys bank and make the following four investments. Your first deposit of $480 will be at the end of Year 1, your second deposit of $1,000 will be at the end of Year 2, your third deposit of $380 will be at the end of Year 4, and your last deposit of $1,290 will be at the end of Year 6? If Shelly guarantees you a 6% interest rate, what is the accumulated value of your four deposits at the end of year 6? How much interest will you generate?