Assignment:
1 A company purchases a pump for $75,000. It depreciates it by the straight line method using a life of 5 years. After three years, how much is left to be depreciated?
(A) $60,000
(B) $45,000
(C) $30,000
(D) $15,000
2 You want to start up a business. How might you raise the capital to do so? (circle all that apply):
(A) Borrow it from a bank
(B) Sell bonds
(C) Buy bonds
(D) Issue stock
(E) Buy stock
(F) Invest your own money
(G) Invest money you borrowed from friends and family
3 Your company makes hard drives. It sells $50k of them to a customer on Nov 3, 2017 from its inventory. It delivers them to the customer on Nov 15, 2017 and gets paid the cash ($50k) for them on Nov 30, 2017.
How much has its cash flow increased by on November 3, 2017 ?
(A) $50k
(B) $0
(C) None of the above
4 For the company above, how much has its net income increased by on Nov 3, 2017 ?
(A) $50k
(B) $0
(C) None of the above
5 For the company above, how much has its accounts receivable changed by on Nov 3, 2017 ?
(A) Increased by $50k
(B) $0
(C) Decreased by $50k
(D) None of the above
6 For the company above, how much has its inventory changed by on Nov 15, 2017 ?
(A) Increased by $50k
(B) $0
(C) Decreased by $50k
(D) None of the above
7 For the company above, how much as the accounts payable changed by on Nov 3, 2017 ?
(A) Increased by $50k
(B) $0
(C) Decreased by $50k
The managerial balance sheet for Ajax Corporation is shown below. All numbers are in millions:
Invested Capital Capital Employed
$ 10 Cash $50 Short and long term debt
$ 20 Working capital ??? Owner's equity
$120 Assets
$ ??? $ ???
8 What is the Owners equity for Ajax Corporation (above) ?
9 What is the Invested capital for Ajax Corporation (above) ?
10 How much does the capital employed change the moment after Ajax (above) takes on an additional $20 million in debt by selling bonds.
(A) Increases by $20k
(B) $0
(C) Decreases by $20k
(D) None of the above
11 When Ajax uses $5 million of its cash to buy back some of its outstanding bonds, what changes on the left hand side of the managerial balance sheet?
(A) Cash increases by $5 million
(B) Cash decreases by $5 million
(C) Working capital increases by $5 million
(D) Assets increase by $5 million
(E) None of the above
12 You start up a new business and your investors are expecting a return of 10%. You invest $248,685. What must your after tax cash flow be in years 1, 2 and 3 of the business (assume they are the same) for you to breakeven on the investment ?
13 If your expectations for the return on the business increase from 10% to 15%, do you expect the after tax cash flow required to breakeven to increase or decrease?
14 You are running a business and looking at your working capital. You notice that the accounts receivable increases by $10 million from the end of Sep 2017 to the end of Dec 2017. Inventory decreased by $20 million and accounts payable increased by $30 million over this same period. How much has the working capital changed by over this period?
15 The managerial balance sheet at the end of 2009 and 2010 is shown below for Ajax Incorporated.
End of 2009
|
Invested Capital
|
Capital Employed
|
|
Cash $385
|
Short term Debt $570
|
|
WCR $4884
|
Long term financing $6129
|
|
Net Fixed Assets $1430
|
Long term debt $1300
|
|
Total Invested Capital $6699
|
Shareholder equity $4829
|
|
|
Total Capital Employed $6699
|
End of 2010
|
Invested Capital
|
Capital Employed
|
|
Cash $330
|
Short term Debt $2100
|
|
WCR $6710
|
Long term financing $6535
|
|
Net Fixed Assets $1595
|
Long term debt $1200
|
|
Total Invested Capital $8635
|
Shareholder equity $5335
|
|
|
Total Capital Employed $8635
|
(A)How much more short term debt did the company take on from the end of 2009 to the end of 2010 ?
(B) How much more cash on hand does the company have at the end of 2010 than it did at the end of 2009 ?
(C) What is the change in Invested Capital from 2009 to 2010 ?
(D) How much of the change in Invested Capital from 2009 to 2010 was financed by increasing the short term debt ?
(E) If the company borrowed more money in 2010 by taking on more short term debt, why didn't the cash increase from 2009 to 2010 ?
(1) The cash was consumed by other things such as an increase in working capital
(2) The cash was consumed by other things such as a decrease in working capital
(F)Could the company could have also taken on additional long term debt or issued stock in order to raise the cash needed for financing the increase in working capital.
(1) Yes, it could have done so
(2) No, these actions would not provide cash 16 Over the course of a year, a company has $220 million in cash flow from operations, it raises $45 million by issuing bonds and buys a chemical plant for $250 million from a competitor. What is the change in cash flow from these activities that were completed over the year?