Adams Bookstore Inc.
Financial Information
For the Years 2014 and 2015 ($)
|
2015
|
2014
|
|
|
Sales
|
2900000
|
2300000
|
|
|
Marketable Securities
|
25000
|
21000
|
BS/CA
|
|
Accounts Payable
|
505000
|
310000
|
|
|
Depreciation
|
4.000
|
58000
|
|
|
Common Stock ($2 par)
|
?
|
?
|
BS/OE
|
|
Accumulated Depreciation
|
489000
|
485000
|
|
|
Cash
|
52000
|
41000
|
|
|
Interest Expense
|
112000
|
68000
|
|
|
Inventory
|
515000
|
420000
|
|
|
Long-term Debt
|
1568100
|
1061000
|
|
|
Cost of Goods Sold
|
2030000
|
1595000
|
|
|
Lease Expense
|
70000
|
65000
|
IS
|
|
Retained Earnings
|
?
|
536000
|
|
|
Plant & Equipment
|
3080000
|
2170000
|
|
|
Accounts Receivable
|
420000
|
372000
|
|
|
Accrued Expenses
|
35000
|
30000
|
BS/CL
|
|
Selling & Admin. Expense
|
420000
|
390000
|
|
|
Additional Paid-in-Capital
|
691000
|
542000
|
BS/OE
|
|
|
|
|
|
Note:
|
|
|
|
|
Tax Rate
|
0,35
|
0,35
|
|
|
Total Shares
|
38.000
|
30.000
|
|
|
Earnings per Share
|
3,523684211
|
2,686666667
|
|
|
Additional Depreciation
|
4.000
|
|
|
|
No dividend distributed in 2014
|
|
|
|
1)
a) Construct the Income Statement of Adam Bookstore for the years of 2014 and 2015
b) Construct the Balance Sheet of Adam Bookstore for the years of 2014 and 2015
c) Construct the Cash Flow Statement of Adam Bookstore for the year of 2015
d) Calculate the Quick, Debt to Equity, and Operating Profit Margin Ratiosfor 2014 and 2015.Briefly discuss the ratios. What is trend from year to year?What factors might affect the ratios?
Note: The numbers in financial statements are both market and book values.
That means book and market values are the same, which are the current numbers in the statements.
2) Find the company's net profits using the following information. (5-Point) (Please show the steps of solving the problem)
Return on total assets = 2.5%, Total Asset Turnover = 0.5
Cost of Goods Sold = $425,000, Gross Profit Margin = 0.3
3) ABC Enterprises is interested in investing in a new project. The project's cost of capital is 11%.The project is expected to cost $250,000 as net investment and the expected net cash flows are:
Year 1 =$70,000; Year 2 =$80,000; Year 3 =$60,000; Year 4 =$40,000; Year 5 =$70,000.
a) Calculate the project's NPV?
b) Calculate the project's IRR?
c) Calculate the project's payback period?
d) Should the project be accepted or not? Briefly discuss.
4) XYZ Corporation is expected to pay a dividend of $0.50 in the upcoming year. Dividends are expected to grow at the rate of 3% per year. The risk-free rate of return is 2.5% and the expected return on the market portfolio is 10.5%. The stock of XYZ Corporation has a beta of 0.8. The current stock price is $9.25.
a) Calculate the return you should require on XYZ's stock?
b) Calculate the intrinsic value of XYZ's stock?
c) Do you suggest buying XYZ stock or not? Explain briefly.
5) a) If a firm has an ROA of 14% and a debt/equity ratio of 0.8, what is the firm's ROE.
b) Over the past year you earned a nominal rate of interest of 8 percent on your money. The inflation rate was 5 percent over the same period. Calculate the exact actual growth rate of your purchasing power.