Question 1: Prepare in good form an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.
Sales ...................................................................................................... $ 600,000
Shares outstanding .................................................................................... 100,000
Cost of goods sold ..................................................................................... 200,000
Interest expense ......................................................................................... 30,000
Selling and administrative expense ............................................................ 40,000
Depreciation expense ................................................................................. 20,000
Preferred stock dividends .......................................................................... 80,000
Taxes ......................................................................................................... 100,000
Question 2: Coastal Pipeline, Inc., anticipated cash flow from operating activities of $ 8 million in 2010. It will need to spend $ 1.5 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at $. 6 million and preferred stock dividends at $. 25 million.
a. What is the firm's projected free cash flow for the year 2010?
b. What does the concept of free cash flow represent?
Do not solve highlighted information, just use as reference for answering 29, 30, 31, and 32:
Question 3: Prepare a statement of cash flows for the Jeter Corporation
JETER CORPORATION
Income Statement
For the Year Ended December 31, 2010
Sales .......................................................................... $ 3,300,000
Cost of goods sold ..................................................... 1,950,000
Gross profits .............................................................. 1,350,000
Selling and administrative expense .......................... 650,000
Depreciation expense ...............................................230,000
Operating income .................................................... 470,000
Interest expense ...................................................... 80,000
Earnings before taxes ..............................................390,000
Taxes ......................................................................140,000
Earnings after taxes ...............................................250,000
Preferred stock dividends .......................................10,000
Earnings available to common stockholders ...........$ 240,000
Shares outstanding .................................................150,000
Earnings per share .................................................. $ 1.60
Statement of Retained Earnings
For the Year Ended December 31, 2010
Retained earnings, balance, January 1, 2010 ............................................. $ 800,000
Add: Earnings available to common stockholders, 2010 ........................ 240,000
Deduct: Cash dividends declared and paid in 2010 ................................ 140,000
Retained earnings, balance, December 31, 2010 ....................................... $ 900,000
Comparative Balance Sheets For 2009 and 2010
Year- End 2009 Year- End 2010
Assets Current assets:
Cash .................................................................. $ 100,000 $ 120,000
Accounts receivable ( net) .................................. 500,000 510,000
Inventory ........................................................... 610,000 640,000
Prepaid expenses ............................................. 60,000 30,000
Total current assets ....................................... 1,270,000 1,300,000
Investments ( long- term securities) .................... 90,000 80,000
Plant and equipment ......................................... 2,000,000 2,600,000
Less: Accumulated depreciation ...................... 1,000,000 1,230,000
Net plant and equipment .................................. 1,000,000 1,370,000
Total assets ................................................... $ 2,360,000 $ 2,750,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ............................................. $ 300,000 $ 550,000
Notes payable ................................................... 500,000 500,000
Accrued expenses ............................................ 70,000 50,000
Total current liabilities .................................... 870,000 1,100,000
Long- term liabilities:
Bonds payable, 2015 ........................................ 100,000 160,000
Total liabilities ................................................ 970,000 1,260,000
Stockholders' equity:
Preferred stock, $ 100 par value ........................ 90,000 90,000
Common stock, $ 1 par value ............................ 150,000 150,000
Capital paid in excess of par ............................ 350,000 350,000
Retained earnings ............................................. 800,000 900,000
Total stockholders' equity ............................. 1,390,000 1,490,000
Total liabilities and stockholders' equity ....... $ 2,360,000 $ 2,750,000
(The following questions apply to the Jetter Corporation above, as presented in Problem 28.)
Question 4: Describe the general relationship between net income and net cash flows from operating activities for the firm.
Question 5: Has the buildup in plant and equipment been financed in a satisfactory manner? Briefly discuss.
Question 6: Compute the book value per common share for both 2009 and 2010 for the Jeter Corporation.
Question 7: If the market value of a share of common stock is 3.1 times book value for 2010, what is the firm's P/ E ratio for 2010? (Round to the nearest whole number).