Harper Industries has $900 million of common equity on its balance sheet; its stock price is$80 per share; and its market value added (MVA) is $50 million. How many common shares are currently outstanding?

Barton Industries has operating income for the year of $3,500,000 and a 36% tax rate. Its total invested capital is$20,000,000 and its after-tax percentage cost of capital is 8%. What is the firm’s EVA?

Byron Books Inc. recently reported $13 million of net income. Its EBIT was$20.8 million, and its tax rate was 35%. What was its interest expense? (Hint: Write out the headings for an income statement, and fill in the known values. Then divide $13 million of net income by (1-T)=0.65 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.)

Harper Industries has 900 million dollars of common equity on its balance sheet, its stock price is 80 dollars per share, and its market value added (MVA) is 50 million dollars. How many common shares are currently outstanding?

Electronics World Inc. paid out $22.4 million in total common dividends and reported$144.7 million of retained earnings at year-end. The prior year’s retained earnings were $95.5 million. What was the net income? Assume that all dividends declared were actually paid.

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.5 million and net plant and equipment equals$2 million. It has notes payable of $150,000, long-term debt of$750,000, and total common equity of $1.5 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet. a. What is the company’s total debt? b. What is the amount of total liabilities and equity that appears on the firm’s balance sheet? c. What is the balance of current assets on the firm’s balance sheet? d. What is the balance of current liabilities on the firm’s balance sheet? e. What is the amount of accounts payable and accruals on its balance sheet? (Hint: Consider this as a single line item on the firm’s balance sheet.) f. What is the firm’s net working capital? g. What is the firm’s net operating working capital? h. What is the explanation for the difference in your answers to parts f and g?

Henderson Industries has $\$ 500$ million of common equity on its balance sheet; its stock price is $\$ 60$ per share; and its market value added (MVA) is $\$ 130$ million. How many common shares are currently outstanding?

Edelman Engines has $17 billion in total assets. Its balance sheet shows$1.7 billion in current liabilities, $10.2 billion in long-term debt, and$5.1 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $20 per share. What is Edelman’s market/book ratio?

The following data apply to A.L Kaiser & Company (millions of dollars):

$$\begin{array}{lc} \text{Cash and equivalents} & \$ 100.00 \\ \text{Fixed assets} & 283.50 \\ \text{Sales} & 1,000.00 \\ \text{Net income} & 50.00 \\ \text{Current liabilities} & 105.50 \\ \text{Notes payable to bank} & 20.00 \\ \text{Current ratio} & 3.00 \times \\ \text{DSO} & 40.55\hspace{1mm} \text{days} \\ \text{ROE} & 12.00 \% \\ \hline \footnotesize{\text{"This calculation is based on a 365 -day year.}} \end{array}$$

Kaiser has no preferred stock - only common equity, current liabilities, and long-term debt.

Find Kaiser's $(1)$ accounts receivable, $(2)$ current assets, $(3)$ total assets, $(4)$ ROA, $(5)$ common equity, $(6)$ quick ratio, and $(7)$ long-term debt.

You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company headquarters (where all of the firm’s records are kept) has been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statement for the year just ended. The firm had $100,000 in the bank at the end of the prior year, and its working capital accounts except cash remained constant during the year. It earned$5 million in net income during the year but paid $800,000 in dividends to common shareholders. Throughout the year, the firm purchased$5.5 million of machinery that was needed for a new project. You have just spoken to the firm’s accountants and learned that annual depreciation expense for the year is $450,000; however, the purchase price for the machinery represents additions to property, plant, and equipment before depreciation. Finally, you have determined that the only financing done by the firm was to issue long-term debt of$1 million at a 6% interest rate.What was the firm’s end-of-year cash balance? Recreate the firm’s cash flow statement to arrive at your answer.

Edmonds Industries is forecasting the following income statement: $$ \begin{matrix} \text{Sales} & \text{\$ 10.000.000}\\ \text{Operating costs excluding depreciation & amortization} & \text{5.500.000}\\ \text{EBITDA} & \text{\$ 4.500.000}\\ \text{Depreciation and amortization} & \text{1.200.000}\\ \text{EBIT} & \text{\$ 3.300.000}\\ \text{Interest} & \text{500.000}\\ \text{EBT} & \text{\$ 2.800.000}\\ \text{Taxes (40\\%)} & \text{1.120.000}\\ \text{Net income} & \text{\$ 1.680.000}\\ \end{matrix} $$ The CEO would like to see higher sales and a forecasted net income of $2,100,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 6%. The tax rate, which is 40%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate$2.000.000 in net income?

You have applied for a job with a local bank. As part of its evaluation process, you must take an examination on time value of money analysis covering the following questions:

A $5$-year $\$ 100$ ordinary annuity has an annual interest rate of $4 \%$.

• What is its present value?

• What would the present value be if it was a $10$-year annuity?

• What would the present value be if it was a $25$-year annuity?

• What would the present value be if this was a perpetuity?

Arlington Corporation’s financial statements (dollars and shares are in millions) are provided here. $$ \begin{matrix} \text{Balance Sheets as of December 31}\\ \text{ } & \text{2016} & \text{2015}\\ \text{Assets}\\ \text{Cash and equivalents} & \text{\$ 15.000} & \text{\$ 14.000}\\ \text{Accounts receivable} & \text{35.000} & \text{30.000}\\ \text{Inventories} & \text{33.320} & \text{27.000}\\ \text{Total current assets} & \text{\$ 83.320} & \text{\$ 71.000}\\ \text{Net plant and equipment} & \text{48.000} & \text{46.000}\\ \text{Total assets} & \text{\$ 131.320} & \text{\$ 117.000}\\ \text{Liabilities and Equity}\\ \text{Accounts payable} & \text{\$ 10.100} & \text{\$ 9.000}\\ \text{Accruals} & \text{8.000} & \text{6.000}\\ \text{Notes payable} & \text{7.000} & \text{5.050}\\ \text{Total current liabilities} & \text{\$ 25.100} & \text{\$ 20.050}\\ \text{Long-term bonds} & \text{20.000} & \text{20.000}\\ \text{Total liabilities} & \text{\$ 45.100} & \text{\$ 40.050}\\ \text{Common stack (4.000) shares)} & \text{40.000} & \text{40.000}\\ \text{Retained earnings} & \text{46.220} & \text{36.950}\\ \text{Common equity} & \text{\$ 86.220} & \text{\$ 76.950}\\ \text{Total liabilities and equity} & \text{\$ 131.320} & \text{\$ 117.000}\\ \end{matrix} $$ $$ \begin{matrix} \text{Income Statement for Year Ending December 31, 2016}\\ \text{Sales} & \text{\$ 210.000}\\ \text{Operating costs excluding depreciation and amortization} & \text{160.000}\\ \text{EBITDA} & \text{\$ 50.000}\\ \text{Depreciation & amortization} & \text{6.000}\\ \text{EBIT} & \text{\$44.000}\\ \text{Interest} & \text{5.350}\\ \text{EBT} & \text{\$ 38.650}\\ \text{Taxes (40\\%)} & \text{15.460}\\ \text{Net income} & \text{\$ 23.190}\\ \text{Dividends paid} & \text{\$ 13.920}\\ \end{matrix} $$ a. What was net operating working capital for 2015 and 2016? b. What was Arlington’s 2016 free cash flow? c. Construct Arlington’s 2016 statement of stockholders’ equity. d. What was Arlington’s 2016 EVA? Assume that its after-tax cost of capital is 10%. e. What was Arlington’s MVA at year-end 2016? Assume that its stock price at December 31, 2016, was $25.

Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income.Use (+) to indicate an increase, (-) to indicate a decrease, and(0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer the questions you can.)

$$\begin{matrix} \text{ } & \text{Total Current Assets} & \text{Current Ratio} & \text{Effect on Net income}\\ \text{a. Cahs is acquired through issuance of additional common stock}\\ \text{b. Merchandise is sold for cash.}\\ \text{c. Federal income tax due for the previous year is paid.}\\ \text{d. A fixed asset is sold for less than book value.}\\ \text{e. A fixed asset is sold for more than book value.}\\ \text{f. Merchandise is sold on credit.}\\ \text{g. Payment is made to trade creditors for previous purchases.}\\ \text{h. A cash dividend is declared and paid.}\\ \text{i. Cash is obtained through short-term bank loans.}\\ \text{j. Short-term notes receivable are sold at a discount.}\\ \text{k. Marketable securities are sold below cost.}\\ \text{l. Advances are made to employees.}\\ \text{m. Current operating expenses are paid.}\\ \text{n. Short-term promissory notes are issued to trade creditors in exchange for past due accounts payable.}\\ \text{o. 10-year notes are issued to pay off accounts payable.}\\ \text{p. A fully depreciated asset is retired.}\\ \text{q. Accounts receivable are collected.}\\ \text{r. Equipment is purchased with short-term notes.}\\ \text{s. Merchandise is purchased on credit.}\\ \text{t. The estimated taxes payable are increased.}\\ \end{matrix}$$