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Course
4520
Subject
Finance
Date
Apr 3, 2024
Type
xlsx
Pages
15
Uploaded by Inara_K
Question
Total Points
Your Score
Problem 1
25
Problem 2a
10
Problem 2b
3
Problem 2c
3
Problem 2d
8
Problem 3
8
Problem 4a
8
Problem 4b
5
Problem 5
6
Problem 6
6
Total
82
0
Your Name:
I agree to not communicate with others. I will not use email, the Internet, text, or other communication devices. I will not share this exam with other students.
Question 1 (25 points)
Income Statement
Actual
Projected 2023
2024
2025
Sales
1,490
1,646
Cost of Goods Sold
817
799
Selling, General, and Administrative 221
313
Operating Income Before Depreciation
452
535
Depreciation and Amortization
81
90
EBIT
371
445
Interest Expense
3
3
Pretax Income
368
441
Income Taxes 77
93
Net Income (Loss)
291
349
Cash Dividends
46
51
Retained
245
298
INCOME STATEMENT ASSUMPTIONS
2024
2025
Sales growth
10.5%
10.0%
COGS/Sales
48.5%
47.5%
SG&A/Sales
19.0%
18.0%
Depreciation % (Use average fixed assets)
8.3%
8.3%
Interest Rate (Use average debt)
6.3%
6.3%
Tax rate
21.0%
21.0%
Dividend growth
10.0%
10.0%
Balance Sheet
Actual
Projected 2023
2024
2025
In this problem, you will create a fully integrated Income Statement, Balance Sheet, and Statement of Cash Flows. Assumptions are provided below the income statement and below the balance sheet. Complete all cells filled yellow.
ASSETS
Cash and Short-Term Investments
76
###
Receivables
120
155
Inventories - Total
81
80
Other Current Assets
19
21
Total Current Assets
296
###
Property, Plant, and Equipment, Gross
975
1,205
Accumulated Depreciation & Amortization 209
299
Property, Plant, and Equipment, Net
766
906
Intangibles
19
19
TOTAL ASSETS
1,081
###
LIABILITIES
Accounts Payable
102
91
Debt
57
52
Other Liabilities
11
12
Deferred Taxes
12
19
EQUITY
Common Stock-Par
98
98
Additional Paid-In Capital
124
###
Retained Earnings
795
1,093
Treasury Stock - Total Dollar Amount
118
118
Total stockholders equity
899
###
TOTAL LIABILITIES AND EQUITY
1,081
###
BALANCE SHEET ASSUMPTIONS
2024
2025
Minimum cash balance (% of sales)
6.5%
6.5%
Accounts Receivable Days (Use 360 days)
34
33
Inventory Days (Use 360 days)
36
35
Other Current Assets
Grow at sales growth rate
Fixed Assets/Sales
55.0%
54.0%
Intangibles
Grow at 2%
Grow at 2%
Accounts Payable Days
41
41
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Other Liabilities
Grow at sales growth rate
Deferred Taxes
20% of income taxes are deferred each period
20%
20%
Debt
The firm plans to pay down $5 in debt each period
$5 $5 Equity
Statement of Cash Flows
Projected 2024
2025
Cash flow from operating activities
Net Income
349
Depreciation
90
Changes in Working Capital:
Accounts Receivable
-35
Inventory
1
Other Current Assets
-2
Accounts Payable
-11
Change in Deferred Tax Liabilities
7
Change in Other Liabilities
1
Cash Flows from Operations
399
Cash flow from investing activities
Purchases of Fixed Assets--Capital Expenditures
-230
Purchases of Intangible Assets
0
Build a repurchases schedule (see below in row 108) to close the model. Fill in rows 110-112 to compute total cash available for repurchases. If the cash available in 113 is negative, the firm will issue stock (increase additional paid-in-capital in row 55) rather than repurchase shares. Hold common stock par and paid in cpaital in rows 54 and 55 constant.
Net cash used in investing activities
-230
Cash flow from financing activities
Change in Debt
-5
Common Stock and Paid-In-Capital
###
Treasury Stock Repurchases
0
Cash Dividends Paid -51
Net cash from financing activities
###
Net increase in cash and cash equivalents
###
Repurchases Schedule
Calculation of Repurchases 2024
2025
Cash at Beginning of Period
76
Cash Flows Before Repurchases
###
Minimum Cash Balance
107.01925
Total cash available for repurchases
###
Question 2 (19 points)
The income statement and balance sheet are provided below. Complete the 3 questions below the Use a 20% tax rate.
Points
Income Statement
Actual
2023
2024
2025
Sales
2,425
2,619
2,802
Cost of Goods Sold
1,091
1,178
1,261
Selling, General, and Administrative 461
498
532
Operating Income Before Depreciation
873
943
1,009
Depreciation and Amortization
105
120
135
EBIT
768
822
874
Interest Expense
5
6
6
Pretax Income
763
816
868
Income Taxes 153
163
174
Net Income (Loss)
610
653
694
Cash Dividends
76
84
92
Retained
534
569
602
Balance Sheet
Actual
2023
2024
2025
ASSETS
Cash and Short-Term Investments
145
157
168
Receivables
229
240
257
Inventories - Total
106
118
126
Other Current Assets
29
32
34
Total Current Assets
510
547
585
Property, Plant, and Equipment, Gross
1,753
1,954
2,188
Accumulated Depreciation & Amortization 420
540
675
Property, Plant, and Equipment, Net
1,334
1,414
1,513
Intangibles
27
27
27
TOTAL ASSETS
1,871
1,988
2,125
LIABILITIES
Accounts Payable
121
134
144
Other Current Liabilities
9
11
12
Debt
95
101
107
Other Long-Term Liabilities
15
17
18
Deferred Taxes
34
36
38
EQUITY
Common Stock
176
176
176
Capital Surplus
146
146
146
Retained Earnings
1,726
2,295
2,897
Treasury Stock - Total Dollar Amount
451
926
1,411
Total stockholders equity
1,597
1,690
1,807
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TOTAL LIABILITIES AND EQUITY
1,871
1,988
2,125
Question 2a (10 points)
Compute Free Cash Flow to the Firm for 2022 to 2028. Use a 22% tax rate. Add rows if necessary
2024
2025
Question 2b (3 points)
Compute Free Cash Flow to Equity (FCFE) for 2024 to 2028. Use a 22% tax rate. Add rows if nec
2024
2025
Question 2c (3 points)
Comparable firms are trading at 6.8x EBITDA. Use the multiple approach to determine the termi
Question 2d (8 points)
2024
2025
Use the WACC valuation methodology to find the 1) enterprise value and, 2) equity value as of 2
"excess" and can be used to pay down debt. Carefully show your work in the rows below. Use mid
the terminal value using the perpetuity method in cell H92. Use a WACC of 10% and long
financial statements.
Projected 2026
2027
2028
2,970
3,119
3,243
1,337
1,403
1,460
564
593
616
1,069
1,123
1,168
150
166
182
919
957
986
7
7
7
913
950
978
183
190
196
730
760
783
102
112
123
628
648
660
Projected 2026
2027
2028
178
187
195
272
286
297
134
140
146
36
38
39
620
651
677
2,428
2,675
2,924
825
990
1,172
1,604
1,684
1,751
27
27
27
2,251
2,362
2,456
152
160
166
14
15
17
113
119
125
19
20
21
40
42
43
176
176
176
146
146
146
3,526
4,174
4,833
1,933
2,488
3,070
1,914
2,007
2,085
2,251
2,362
2,456
y.
2026
2027
2028
cessary.
2026
2027
2028
inal value in 2028. Show your work.
2026
2027
2028
2023. Assume that 2023 cash is d-year discounting. Recompute g-term growth of 1.5%.
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Question 3 (8 points)
Pre-Event Period
Event Period
Regression results for target (pre-event period)
Intercept
0.00085
-2
0.04%
0.01%
-0.61%
Slope
0.68
-1
1.20%
-1.32%
-0.41%
Standard Error
0.049
0
7.10%
-1.02%
-2.41%
Acquirer market capitalization (10 days before event)
4,800,000 1
0.81%
-0.20%
-1.30%
Target market capitalization (10 days before event)
2,620,000 2
0.12%
0.50%
-0.10%
Target Cumulative Abnormal Return (CAR)
On January 1, 2020 (day=0) Blerg Corp. announced an acquisition of Barm Corp. For this question, we will conduct an event study to regression results for the target and the market capitalizations have already been provided to you in Rows 6-10. The event period returns fo
announcement to two days following the announcement are provided in Columns E-F. The acquirer abnormal returns and cumulative abnorm
cumulative abnormal return for the target and total dollar synergy over the [-2,2] event window. Fill out the cells highlighted yellow. Feel fre
# Days before event
Target Return
Return on S&P 500
Acquirer Abnormal Return (AR)
Question 4A (8 Points): DIRECTIONS
Points
Offer calculation
Stock Price
$10.75
Deal Premium
22%
Deal Stock Price
# fully diluted shares outstanding (millions)
110
Purchase price of equity (millions)
Management Participation
Amount
Management Rollover
Cash to Shareholders
SOURCES (in Millions)
Amount
Excess Cash
Senior secured note (bank debt)
$870.00
Subordinated note (unsecured debt)
$520.00
Sponsor Equity
Management Rollover
Total Sources
USES (in Millions)
Amount
Equity Purchase Price
Debt Retired
Purchase of Pref. Stock
Transaction Costs
Management Rollover
Total Uses
A group of managers is going to offer to purchase the company they manage with the help
debt (par value of $375 million) and preferred stock (par value of $125 million) at its par v
million in subordinated debt. The sponsor also intends to finance the transaction by investi
equity). The company currently has a cash balance of $30 million and requires a minimum
yellow.
p of a financial sponsor. In addition to redeeming the existing stock, mana
value. The sponsor intends to finance this transaction by issuing various d
ing its own equity, and having management invest $140 million in equity
m cash balance of $26 million. The financial sponsor will put in enough e
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agement and its financial sponsor will also redeem all outstanding debt securities, including $870 million in senior secured debt, $520 y from rollover equity. Transaction costs are 1.7% (based on equity to fund the remainder. Fill in all blank cells highlighted
Question 4B (5 points)
Points
Mike Myers Inc. went private through a leveraged buyout. The financial sponsor, Goldmember Fund, made an equity investment of $93 on the transaction date 6/08/2018. The LBO increased debt to $86. Goldmember Fund exited the transaction on 12/07/2022. By the exit date, debt had been paid down to $51. Between the deal and the exit date, the value of the assets did not change (e.g., cash flows were not increased due to operating improvements and the firm was valued at the same cash flow multiple). What is the IRR to equity holders (Goldmember Fund)? Carefully show your work for partial credit.
Question 5 (6 points)
Consider the large-sample event study results we discussed in class. What does the literature say about whether mergers & value for acquirer shareholders? For target shareholders? Do mergers create combined synergies? Does the target or acquire
potential explanations for this result? Answer in NO MORE THAN 6 SENTENCES.
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Providing for Doubtful Accounts
At the end of the current year, the accounts receivable account has a debit balance of $969,000 and sales for the year total $10,990,000.
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What are the future value and the interest earned if $4000 is invested for 3 years at 8% compounded quarterly? (Round your answers to the nearest cent.)
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a. A single parent with modified AGI of $214,800 and one child age 4.
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Assignment - 3. Automobile Loans
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John takes a car loan for $18,000. The loan is for 36 months and has an interest rate of 2.5%. There are additional $500
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O 2.5%
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FINA310 IP TEMPLATE FOR STUDENTS
Student name:
Date:
ACTUAL
FORECAST
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Next Year
Total Revenue
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- pls answer thanks q .10arrow_forwardSubject:arrow_forwardeste X * CengageNOww2 | Online teachin x : Cengage Learning genow.com.filrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=8inprogress=false еВook Show Me How Providing for Doubtful Accounts At the end of the current year, the accounts receivable account has a debit balance of $969,000 and sales for the year total $10,990,000. a. The allowance account before adjustment has a credit balance of $13,100. Bad debt expense is estimated at 1/4 of 1% of sales. b. The allowance account before adjustment has a credit balance of $13,100. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $41,900. C. The allowance account before adjustment has a debit balance of $4,600. Bad debt expense is estimated at 3/4 of 1% of sales. d. The allowance account before adjustment has a debit balance of $4,600. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $38,200. Determine the amount of the adjusting…arrow_forward
- Solve these financial accounting question not use aiarrow_forwardCourses Mastering Chernie X 2MateryCheme X loud/modules/unproctoredTest.QuestionSheet McCraith-Sectic x Updte Help Caroline Achienge S01243611acadceduLogout all 2021 I Chapter 1 Consumer Finance / Section 1.5 Digital Exercises Gradebook. Extemat kercises Remaining Time Unimted Suppose you are paid $3,000 per month and your employer's 401(k) matches your contributions by 10% up to a maximum of 15% of your pay. Assuming you max-out your retirement savings and you work for 25 years, how much will the 401(k) be worth when you retire (if you can get an APR of 8% during your work years)? If you are taxed at a rate of 27%, then how much will you have when you retire? Round all answers to 2 decimal places. Before taxes retirement amount $ Number After taxes retirement amount $ Number Submit Assignment Quit & Save Васк Question Menu 4 Next 38°F Partly sunny A 0) 411 PM 11/19/202 end home delete prt sc 144 4+ 4- 40 num lock backspace & 8. 6. 7. home |近arrow_forwardA Final Exam - MATH 1330 - Math b Details | bartleby E New tab A https://www.webassign.net/web/Student/Assignment-Responses/submit?dep=254878928tags=autosave#question4023958_1 Sign in 12. DETAILS HARMATHAP12 6.2.009. MYΝΟΤΕS What are the future value and the interest earned if $4000 is invested for 3 years at 8% compounded quarterly? (Round your answers to the nearest cent.) future value 24 interest earned %24arrow_forward
- Please help me. Thankyou.arrow_forwarddont give answer in image formatarrow_forward10:28 Search or type URL Chegg Home Expert Q&A My solutions Hide student question Student question Determine the amount of the child tax credit in each of the following cases: Answer is complete but not entirely correct. 3 Determine the amount of the child tax credit in each of the following cases: ||| Vol) 28.43 LTE KB/S 4G > Answer is complete but not entirely correct. a. A single parent with modified AGI of $214,800 and one child age 4. b. A single parent with modified AGI of $79,400 and three children ages 7, 9, and 12. c. A married couple, filing jointly, with modified AGI of $409,333 and two children age 14 and 16. d. A married couple, filing jointly, with modified AGI of $133,455 and one child, age 13. о ا... Child Tax Credit Allowed S $ S S 1,275 X 6,000 X 1,550 x 2,000 X < 91% Notifications Time Left:arrow_forward
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