FIN 610 Problem Sets

MODULE 1  HW (Weeks 1 & 2)

1. Review the following 10-K statements

a. Here is a link to GE’s 2014 10-K.

http://www.ge.com/ar2014/10k/

Find the Income Statement. Can you identify revenues? Net income? Anything unusual here for GE?

b. Find another company’s 10k and see if it looks differently than GE. Can you identify revenues? Net income? Anything unusual here for this company?

1. Using this data below, construct an income statement. Last year Sun Skateboards had $200,000 in revenues. The company had $70,000 in COGS and $30,000 is SG&A. It was in the 40% corporate tax rate. They had depreciation expense of $35,000 and interest expense of $20,000.

1. Last year Sun Skateboards had $80,000 in current assets (20%cash, 30% accounts receivable, 40% inventory and 10% pre-paid expenses); $47,000 in current liabilities and $25,000 in long term debt. It had $61,000 in fixed assets. Determine the amount of shareholder’s equity and construct a balance sheet for Sun Skateboards.

2. Last year, Sun Skateboards had $50,000 in operating cash flow, $45,000 in financing cash flow and $30,000 in investing cash flow. Paid $44,000 to employees, $15,000 for rent, $5000 for utilities, $15,000 in dividends, Generate a statement of cash flows for Sun Skateboards.

3.        Time Value of Money----   Future values/compound interest/present values

   ------Review material in the following links

    : http://www.fao.org/docrep/W4343E/w4343e07.htm

    http://www.mathsisfun.com/money/net-present-value.html

1.     What is the future value of $10 invested at 10% at the end of 1 year

2.      What is the future value of $10 invested at 10% at the end of 5 year?

3.     Net Present Value ( NPV) Scenario:--  NPV is the  Present value of incoming money minus initial investment.   For a project to be profitable, NPV has to be positive. Let us apply this concept to the following situation:

You own a Pizza Restaurant and you need to expand your cooking capacity to meet demand. You need a new oven which will cost $100,000. Your current oven costs $15,000 a year to operate and you expect to save $5,000 a year operating this new oven. The anticipated life of the oven is 10 years and it will be worth $0 at the end of that period. Your current tax rate is 30%. You expect net profits to increase as follows: Y1 $7,500, Y2 to Y7 $10,000, Y8 to Y10 $12,000.

What is the NPV of this project? Should you buy the oven? Assume 10% interest rate