Calculate the value of a firm through the use of discounted cash flow analysis.
Problems:
Complete problem: Total Net Operating Capital
XYZ, Inc. reported $20 million in operating current assets, $25 million in net fixed assets, and $6 million in operating current liabilities. How much total net operating capital does XYZ, Inc. have?
Show your work.
Complete problem: Balance Sheet Analysis
Complete the balance sheet and sales information in the table that follows for XYZ, Inc., using the following financial data:
Show your work.
Total assets turnover: 1.5
Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 25%
Total liabilities-to-assets ratio: 40%
Quick ratio: 0.80
Days sales outstanding (based on 365-day year): 36.5 days
Inventory turnover ratio: 3.75
Partial Income Statement Information
Sales
Costs of goods sold
Sold
Balance Sheet Information
Cash
Accounts payable
Accounts receivable
Long-term debt
50,000
Inventories
Common Stock
Fixed Assets
Retained earnings
100,000
Total Assets
$400,000
Total liabilities and equity
Complete problem: Yield to Maturity for Annual Payments
XYZ Corporation’s bonds have 14 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $950. What is their yield to maturity? Show your work.
Complete problem: Required Rate of Return
Show your work.
Suppose rRF = 6%; rM = 10%; and rA = 14%
Calculate Stocks A’s beta.
If Stock A’s beta were 2.0, then what would be A’s new required rate of return?
Complete problem: Portfolio Beta
You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio’s new beta be after these transactions? Show your work.
Prepare this Assignment by responding to the problems as an Excel® or Microsoft® Word®, showing all necessary formulas and steps. List each question, followed by your answer.
The Module 2 Competency Assessment has 3 parts.
Part 1 Prepare balance sheet analysis using financial data
Calculate corporate tax liabilities
Calculate liabilities and equity
Part 2 Analyze Portfolio Beta
Calculate stock beta
Part 3 Calculate corporate tax liabilities
Calculate yield to maturity for annual payments
Analyze portfolio beta
