5 points) Here is a simplified balance sheet for Locust Farming:
Locust Farming Balance Sheet ($ in millions) Current assets $ 42,534 Current liabilities $ 29,745 Long-term assets 46,852 Long-term debt 27,762 Other liabilities 14,337 Equity 17,542 Total $ 89,386 Total $ 89,386
Locust has 667 million shares outstanding with a market price of $93 a share.
a. Calculate the company’s market value added.
b. Calculate the market-to-book ratio. c. How much value as the company created for its shareholders as a percent of shareholders’ equity, that is, the net capital contributed to the firm by its shareholders?
Problem 2 (1 point) Target entered fiscal 2019 with a total capitalization of $21,925 million. In 2019, debt investors received interest income of $884 million. Net income to shareholders was $8,675 million. (Assume a tax rate of 21%.)
Calculate the economic value added assuming its cost of capital is 10%.
Problem 3 (1 point)
Torrid Romance Publishers has total receivables of $2,860, which represents 20 days’ sales. Total assets are $71,500. The firm’s operating profit margin is 5%. Find the firm's ROA and asset turnover ratio.
Problem 4 (6.5 points)
Long-term debt ratio 0.3
Times interest earned 8.0 Current ratio 1.1 Quick ratio 1.0 Cash ratio 0.3 Inventory turnover 4.0 Average collection period 73 days
Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity. Note: Turnover and the average collection period are calculated using start-of-year, not average, values. INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Selling, general, and administrative expenses 23.00 Depreciation 33.00 Earnings before interest and taxes (EBIT) Interest expense Income before tax Tax (35% of income before tax) Net income
BALANCE SHEET (Figures in $ millions) This Year Last Year Assets Cash and marketable securities $33 Accounts receivable 47 Inventories 39 Total current assets $119 Net property, plant, and equipment 38 Total assets $157 Liabilities and shareholders’ equity Accounts payable $40.00 $35 Notes payable 50.00 55 Total current liabilities $90 Long-term debt 21 Shareholders’ equity 46 Total liabilities and shareholders’ equity $235.00 $157
