Finance and Value Creation
Finance and Value Creation
Problem One
- Value of Jones Incorporated Stockholder’s Equity
Stock holders’ equity = Total Assets – Total liabilities
Jones, Incorporated total assets = Net fixed assets + net current assets
= $22, 500 + $8, 200
=$30, 700
Total liabilities = current liabilities + long-term liabilities
= $6, 400 + $12, 500
= $18, 900
Stock holders’ equity = $ 30, 700 – $18, 900
= $11, 800
- Value Of Jones Incorporated Networking Capital
Net working capital = current assets – current liabilities
Jones, Incorporated current assets = $8, 200
Jones, Incorporated total current liabilities = $6, 400
Jones, Incorporated net working capital = $8, 200 – $6, 400 = $1, 800
Problem Two
- Tanner Incorporated Net income
| Tanner Incorporated | |
| Income statement | |
| Sales | $863,000 |
| cost of sales | $407,000 |
| gross profit | $456,000 |
| depreciation expenses | $58,000 |
| Interest expense | $23,600 |
| net income before tax | $374,400 |
| Tax (35%) | $131,040 |
| Net income After tax | $243,360 |
- Tanner Incorporated Increase In Retained Earnings
| Net income After tax | $243,360 |
| Cash Dividend | $77, 000 |
| Increase in retained earnings | $166,360 |
Problem Three
Willard incorporated operating cash flow
| Willard Incorporated | |
| Operating cash flow | |
| Sales | $26,400 |
| cost of sales | $9,400 |
| Gross profit | $17,000 |
| Depreciation | $1,500 |
| Interest expense | $925 |
| income before tax | $14,575 |
| Tax (0.4) | $5,830.0 |
| Net Income after tax | $8,745.0 |
| Net cash flow | |
| Net Income after tax | $8,745.0 |
| Depreciation | $1,500 |
| net cash flow | $10,245.0 |
Problem Four
- Drake Company Equity Multiplier
Equity multiplier = total assets/stockholder’s equity
Drake total liabilities = $875, 000 * 0.85 = $743750
Total assets = equity + liability = $743750 + $875, 000 = $1, 618, 750
Equity multiplier = $1, 618, 750/$875, 000
=1.85
- Drake Company Return On Equity
Return on equity = (10.75% *$1, 618, 750)/ /$875, 000
= 19.89%
- Drake Company Net Income
Net income = 10.75% *$1, 618, 750
= $174, 015.63
Problem Five
GTS Corporation Sustainable Growth Rate
SGR = ROE x (1 – dividend-payout ratio)
= 12% * (1 – 30%)
= 8.4%
Problem Six
The Conrad Company…………………….
Use the following coupon code :
BEST22
