Calculate the return you should require on xyzs stock

Assignment Help Financial Accounting

Reference no: EM131288311

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

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.

Reference no: EM131288311

Questions Cloud

What is price of a childs ticket and a senior citizen ticket : The second day she received $145 for 5 senior citizen tickets and 7 children's tickets. What is the price of a child's ticket and a senior citizen ticket? Explain each step you took to arrive at your answer.

The main motives for marriott in using franchising : What could be the main motives for Marriott in using franchising, compared to other entry modes and operation forms?

Select a forecasting model to forecast the short-term demand : From the first case study, evaluate the medical practice and suggest at least two options (not discussed in the case) to maximize patient throughput and revenues without compromising the quality of medical care. Support your suggestion.Speculate h..

Judgment in managerial decision making : Read the Chapter 10 Making Rational Decision in Negotiations, which is in the book "Judgment in Managerial Decision Making".

Calculate the return you should require on xyzs stock : Calculate the return you should require on XYZ's stock - Calculate the intrinsic value of XYZ's stock and Should the project be accepted or not? Briefly discuss.

Why are strategic alliances used in new product development : Why are joint ventures preferred by host countries as an entry strategy for foreign firms?- Why are strategic alliances used in new product development?

Describe applications of the cartesian coordinate system : Describe applications of the Cartesian coordinate system to plot a real-world situation. In your description, indicate the characteristics of each coordinate, and a point in terms of specific x and y coordinates.

Rank the five core strategic principles by importance : Developing relationships within the community is essential to implementing change. Unfortunately, many times this does not occur. Why is this important part of the process often overlooked

What were your goals : Discuss a time you needed to lead at school, work, or home. What were your goals? Did you seek help from anyone?

Reviews

len1288311

11/24/2016 2:34:32 AM

please it is important to show the steps of solving the problems 2-3 and 4 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.The inflation rate was 5 percent over the same period. Calculate the exact actual growth rate of your purchasing power. (5 Points) (Please show the steps of solving the problem)

Write a Review

Required(*) Message

User Account

All Pages