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FIN 401 Module 1 Assignment 3 Ratio
Analysis (100% Score)
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By monday, February 23, 2015 solve the problem below, calculate the
ratios, interpret the results against the industry average, and fill in the
table on the worksheet. Then, provide an analysis of how those results
can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
Cash $45 Accounts payables $45
Receivables 66 Notes payables 45
Inventory 159 Other current liabilities 21
Marketable securities 33 Total current liabilities
$111
Total current assets $303
Net fixed assets 147 Long Term Liabilities
Total Assets $450 Long-term debt 24
Total Liabilities $135
Owners Equity
Common stock $114
Retained earnings 201
Total stockholders’ equity 315
Total liabilities and equity $450
Income Statement Year 2010
Net sales $795
Cost of goods sold 660

Gross profit 135
Selling expenses 73.5
Depreciation 12
EBIT 49.5
Interest expense 4.5
EBT 45
Taxes (40%) 18
Net income 27
1. Calculate the following ratios AND interpret the result against the
industry average:
Ratio Your Answer Industry Average Your
Interpretation
(Good-Fair-Low-Poor)
Profit margin on sales 3%
Return on assets 9%
Receivable turnover 16X
Inventory turnover 10X
Fixed asset turnover 2X
Total asset turnover 3X
Current ratio 2X
Quick ratio 1.5X
Times interest earned 7X
2. Analysis:
Give your interpretation of what the ratios calculations show and how
the business can use this information to improve its performance.
Justify all answers.
Highlight your answers.
Receivable turnover requires the use of credit sales. Since you are not
given this number please use the sales figure of 795.
I am pasting the required form for you to complete, as a reminder.
Remember to show me your work. You can put the calculations at the
end of your paper. If these are not included I will have to count the
answer wrong.

Ratio Your Answer Industry Average Your
Interpretation
(Good-Fair-Low-Poor)
Profit margin on sales 3%
Return on assets 9%
Receivable turnover 1.6X
Inventory turnover 10X
Fixed asset turnover 2X
Total asset turnover 3X
Current ratio 2X
Quick ratio 1.5X
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FIN 401 Module 2 Assignment 2 Cash
Management (100 Score)
Norma’s Cat Food of Shell Knob ships cat food throughout the
country. Norma has determined that through the establishment of
local collection centers around the country, she can speed up the
collection of payments by two and one-half days. Furthermore, the
cash management department of her bank has indicated to her that she
can defer her payments on her accounts by one-half day without
affecting suppliers. The bank has a remote disbursement center in
Iowa.
a.If the company has $5 million per day in collections and $3 million
per day in disbursements, how many dollars will the cash
management system free up? Justify your answers.

b.If the company can earn 8 percent per annum on freed-up funds,
how much will the income be? Justify your answers.
c.If the annual cost of the new system is $800,000, should it be
implemented? Explain why or why not.
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FIN 401 Module 3 Assignment 2 LASA 1 The
Time Value of Money (100 Score)
Mary has been working for a university for almost 25 years and is
now approaching retirement. She wants to address several financial
issues before her retirement and has asked you to help her resolve the
situations below. Her assignment to you is to provide a 4-5 page
report, addressing each of the following issues separately. You are to
show all your calculations and provide a detailed explanation for each
issue.
Issue A:
For the last 19 years, Mary has been depositing $500 in her savings
account , which has earned 5% per year, compounded annually and is
expected to continue paying that amount. Mary will make one more
$500 deposit one year from today. If Mary closes the account right
after she makes the last deposit, how much will this account be worth
at that time?
Issue B:
Mary has been working at the university for 25 years, with an
excellent record of service. As a result, the board wants to reward her

with a bonus to her retirement package. They are offering her $75,000
a year for 20 years, starting one year from her retirement date and
each year for 19 years after that date. Mary would prefer a one-time
payment the day after she retires. What would this amount be if the
appropriate interest rate is 7%?
Issue C:
Mary’sreplacement is unexpectedly hired away by another school,
and Mary is asked to stay in her position for another three years. The
board assumes the bonus should stay the same, but Mary knows the
present value of her bonus will change. What would be the present
value of her deferred annuity?
Issue D:
Mary wants to help pay for her granddaughter Beth’s education. She
has decided to pay for half of the tuition costs at State University,
which are now $11,000 per year. Tuition is expected to increase at a
rate of 7% per year into the foreseeable future. Beth just had her 12th
birthday. Beth plans to start college on her 18th birthday and finish in
four years. Mary will make a deposit today and continue making
deposits each year until Beth starts college. The account will earn 4%
interest, compounded annually. How much must Mary’s deposits be
each year in order to pay half of Beth’s tuition at the beginning of
each school each year?
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FIN 401 Module 4 Assignment 2 The
Weighted Average Cost of Capital (100 Score)

Coogly Company is attempting to identify its weighted average cost
of capital for the coming year and has hired you to answer some
questions they have about the process. They have asked you to
present this information in a PowerPoint presentation to the
company’s management team. The company would like for you to
keep your presentation to approximately 10 slides and use the notes
section in PowerPoint to clarify your point. Your presentation should
address the following questions and offer a final recommendation to
Coogly. Make sure you support your answers and clearly explain the
advantages and disadvantages of utilizing the weighted average cost
of capital methodology. Include at least one graph or chart in your
presentation.
Company Information
The capital structure for the firm will be maintained and is now 10%
preferred stock, 30% debt, and 60% new common stock. No retained
earnings are available. The marginal tax rate for the firm is 40%.
1. Coogly has outstanding preferred stock That pays a dividend of
$4 per share and sells for $82 per share, with a floatation cost of
$6 per share. What is the component cost for Coogly's preferred
stock? What are the advantages and disadvantages of using
preferred stock in the capital structure?
2. If the company issues new common stock, it will sell for $50 per
share with a floatation cost of $9 per share. The last dividend
paid was $3.80 and this dividend is expected to grow at a rate of
7% for the foreseeable future. What is the cost of new equity to
the firm? What are the advantages and disadvantages of issuing
new equity in the capital structure?
3. The company will use new bonds for any capital project,
according to the capital structure. These bonds will have a
market and par value of $1000, with a coupon rate of 6% and a
floatation cost of 7%. The bonds will mature in 20 years and no
other debt will be used for any new investments. What is the
cost of new debt? What are the advantages and disadvantages of
issuing new debt in the capital structure?

4. Given the component costs identified above and the capital
structure for the firm, what is the weighted average cost of
capital for Coogly? What are the advantages and disadvantages
of using this method in the capital budgeting process?
*******************************************************
FIN 401 Module 5 Assignment 1 LASA 2 The
Capital Budgeting Decision (100 Score)
As a financial consultant, you have contracted with Wheel Industries
to evaluate their procedures involving the evaluation of long term
investment opportunities. You have agreed to provide a detailed
report illustrating the use of several techniques for evaluating capital
projects including the weighted average cost of capital to the firm, the
anticipated cash flows for the projects, and the methods used for
project selection. In addition, you have been asked to evaluate two
projects, incorporating risk into the calculations.
You have also agreed to provide an 8-10 page report, in good form,
with detailed explanation of your methodology, findings, and
recommendations.
Company Information
Wheel Industries is considering a three-year expansion project,
Project A. The project requires an initial investment of $1.5 million.
The project will use the straight-line depreciation method. The project
has no salvage value. It is estimated that the project will generate
additional revenues of $1.2 million per year before tax and has
additional annual costs of $600,000. The Marginal Tax rate is 35%.
Required:

1. Wheel has just paid a dividend of $2.50 per share. The
dividends are expected to grow at a constant rate of six percent per
year forever. If the stock is currently selling for $50 per share with a
10% flotation cost, what is the cost of new equity for the firm? What
are the advantages and disadvantages of using this type of financing
for the firm?
2. The firm is considering using debt in its capital structure. If
the market rate of 5% is appropriate for debt of this kind, what is the
after tax cost of debt for the company? What are the advantages and
disadvantages of using this type of financing for the firm?
3. The firm has decided on a capital structure consisting of
30% debt and 70% new common stock. Calculate the WACC and
explain how it is used in the capital budgeting process.
4. Calculate the after tax cash flows for the project for each
year. Explain the methods used in your calculations.
5. If the discount rate were 6 percent calculate the NPV of the
project. Is this an economically acceptable project to undertake? Why
or why not?
6. Now calculate the IRR for the project. Is this an acceptable
project? Why or why not? Is there a conflict between your answer to
part C? Explain why or why not?
Wheel has two other possible investment opportunities, which are
mutually exclusive, and independent of Investment A above. Both
investments will cost $120,000 and have a life of 6 years. The after
tax cash flows are expected to be the same over the six year life for
both projects, and the probabilities for each year's after tax cash flow
is given in the table below.
Investment B Investment C
Probability After Tax
Cash Flow Probability After Tax
Cash Flow
0.25 $20,000 0.30 $22,000
0.50 32,000 0.50 40,000
0.25 40,000 0.20 50,000

7. What is the expected value of each project’s annual after tax
cash flow? Justify your answers and identify any conflicts between
the IRR and the NPV and explain why these conflicts may occur.
8. Assuming that the appropriate discount rate for projects of
this risk level is 8%, what is the risk-adjusted NPV for each project?
Which project, if either, should be selected? Justify your conclusions.
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