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Solution to chapter 9 problems
9-6 Cash $ 100.00 2.0 = $ 200.00
Accounts receivable 200.00 2.0 = 400.00
Inventories 200.00 2.0 = 400.00
Net fixe assets! "00.00 1.0 = "00.00
#otal assets $1000.00 $1"00.00
Accounts %a&able $ "0.00 2 = $ 100.00
Accruals "0.00 2 = 100.00
Notes %a&able 1"0.00 ' 0 = 1"0.00
(on)-ter* ebt 400.00 ' 0 = 400.00
Co**on stoc+ 100.00 ' 0 = 100.00
,etaine earnin)s!! 2"0.00 ' 40 = 290.00
#otal liabilities
an euit& $1000.00 $1140.00
AN = $ /60.00
!Ca%acit& sales = ales0." = $10000." = $2000 ith res%ect to existin) fixe assets.
#ar)et A ratio = $"00$2000 = 0.2".
#ar)et A = 0.2"3$2000 = $"00 = ,euire A. ince the fir* currentl& has $"00 offixe assets no ne fixe assets ill be reuire.
!!Aition to ,5 = 33131 7 8a&out ratio = 0.0"3$200030.4 = $40.
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9- a. AN = 3A0!03 7 3(0!03 7 33131 7 %a&out
=
/"0$
".122$
3$0 7
/"0$
".1$
3$0 7
/"0$
".10$
3$42030.6 = $1/.44 *illion.
#he 5xcel s%reasheet oul loo+ li+e this:
b.
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c. Upton Computers
Pro Forma Balance Sheet
December 31, 2013
(Millions of Dollars
201/
orecast 8ro or*a
;asis < 201/ after
2012 201/ ales Aitions 8ro or*a inancin) inancin)
Cash $ /." 0.0100 $ 4.20 $ 4.20
,eceivables 26.0 0.04/ /1.20 /1.20
Inventories ".0 0.16" 69.60 69.60
#otal current assets $ ." $10".00 $10".00
Net fixe assets /".0 0.100 42.00 42.00
#otal assets $122." $14.00 $14.00
Accounts %a&able $ 9.0 0.02" $ 10.0 $ 10.0
Notes %a&able 1.0 1.00 '1/.44 /1.44
Accruals ." 0.024/ 10.20 10.20
#otal current liabilities $ /"." $ /9.00 $ "2.44
ort)a)e loan 6.0 6.00 6.00
Co**on stoc+ 1".0 1".00 1".00
,etaine earnin)s 66.0 ."6! /."6 /."6
#otal liab. an euit& $122." $1//."6 $14.00
AN = $ 1/.44
! = $10."$/"0 = /
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8a&out = $4.2$10." = 40
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b. B?201/= $/4.9631.06D30.11-0.06 = $41.1"2 *illion.
c. ?@% at 12/12012= $/4.96 ' $41.1"2D31'0.11 = $699.20 *illion.
. #otal cor%orate value = $699.20 ' $49.9 = $49.10 *illion.
e. ?alue of euit& = $49.10 7 3$69.9 ' $140. - $/".0 = $"0/.4 *illion.
8rice %er share = $"0/.4 10 = $"0./4.
Solution to chapter 15 problems
1"- a. Bere are the ste%s involve:
31 >eter*ine the variable cost %er unit at %resent ?:
8rofit = 83E - C - ?3E
$"00000 = 3$1000003"0 - $2000000 - ?3"0
"03? = $2"00000
? = $"0000.
32 >eter*ine the ne %rofit level if the chan)e is *ae:
Ne %rofit = 823E2 - C2- ?23E2
= $9"00030 - $2"00000 - 3$"0000 - $1000030
= $1/"0000.
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3/ >eter*ine the incre*ental %rofit:
8rofit = $1/"0000 7 $"00000 = $"0000.
34 5sti*ate the a%%roxi*ate rate of return on ne invest*ent:
,eturn = 8rofitInvest*ent = $"0000$4000000 = 21.2"
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c. It is i*%ossible to state uneuivocall& hether the ne situation oul have *ore or less
business ris+ than the ol one. e oul nee infor*ation on both the sales %robabilit&
istribution an the uncertaint& about variable in%ut cost in orer to *a+e this eter*ination.
Boever since a hi)her brea+even %oint other thin)s hel constant is *ore ris+&. Also the
%ercenta)e of fixe costs increases:
@l:
E3?C
C
+
=
000"002$0000002$
0000002$
+
= 44.44
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bG= 0. r 7 r,= 6.0 r r31 7 #
(everebeta
a rsb ACCc
0 100< 0.00 6.0< /.60< 0.0 9.0< 9.0
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