AT&T Dell IBM

You are given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000.

AT&T Dell IBM

Coupon 6.80 6.50 8.375%
Maturity 05/15/2036 04/15/2038 11/01/2019
Frequency Semiannual Semiannual Semiannual
Rating A A- A+
1 Calculate the value of the bond if your required return is 5 percent on AT&T, 6.5 percent on Dell, and 8 percent on IBM.
2 Determine the yield to maturity (YTM) on the bonds given the following prices.

AT&T Dell IBM
Price $1,060.00 $1,016.57 $1,307.78

3 Based on each bond’s ratings and your determination of its yield to maturity explain how you rank each bond for risk and return.
4 Assume you had $10,000 to invest. How many of each bond would you have? What dollar amount of interest would each bond return on the investment for the next year? What would your percentage return be for the year, that is, your interest payments divided by the total amount invested? You must submit your backup in Excel or other supporting documentation showing how answers were reached.

Archer Electronics

Archer Electronics Company’s actual sales and purchases for April and May are shown here along with forecasted sales and purchases for June through September.
April (actual) …….sales $320,000……………..purchases $130,000
May (actual)……..sales $300,000……………..purchases $120,000
June (forecast)……….sales $275,000…………..purchases $ 120,000
July (forecast)………..sales $ 275,000…………..purchases $ 180,000
August (forecast)…….sales $ 290,000………….purchases $ 200,000
September (forecast)…………sales $ 330,000…………..purchases $ 170,000

The company makes 10 percent of its sales for cash and 90 percent on credit. Of the credit sales, 20 percent are collected in the month after the sale and 80 percent are collected two months later.Archer pays for 40 percent of its purchases in the month after purchase and 60 percent two months after.
Labor expense equals 10 percent of the current month’s sales. Overhead expense equals $12,000 per month. Interest payments of $30,000 are due in June and September. A cash dividend of $50,000 is scheduled to be paid in June. Tax payments of $25,000 are due in June and September. There is a scheduled capital outlay of $300,000 in September.
Archer Electronics’s ending cash balance in May is $20,000. The minimum desired cash balance is $10,000. Prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowing and repayments for June through September. The maximum desired cash balance is $50,000. Excess cash (above $50,000) is used to buy marketable securities. Marketable securities are sold before borrowing funds in case of a cash shortfall (less than $10,000).

APOLLO SHOES

Week 6 Individual assignment

1. Prepare the balance sheet as of December 31, 2007, and the income statement for the year ended December 31, 2007 assuming Apollo doesn’t adjust sales and accounts receivable for the questionable December sale. (Remember that even though we are drafting the statements; Apollo’s management is responsible for them.)

2. Prepare a cash flow statement for the year ended December 31, 2007.

3. Identify information you believe should be included in notes to the financial statements. Draft the notes. You can use last year’s as a guide.

4. Also, you may want to draft any management letter comments on anything you believe Apollo Shoes can do better from an operational economy and/or efficiency perspective, or methods of strengthening their internal controls. Even though we do not intend to be Apollo’s auditor next year, we want to maintain our professionalism.

1. You should date the report as of the end of fieldwork next week (March 7, 2008).

2. Remember that we didn’t audit Apollo last year, so we will probably need to refer to the “other auditors” who audited the previous year’s financial statements.

3. Adjust the report to reflect the fact that Apollo didn’t adjust its accounts receivable/allowance/sales for the Mall-Warts problems.

4. What do you think about a going-concern disclosure? We will probably need a memo in the workpapers (A-series) addressing this issue and discussing the reasons why we should or shouldn’t give them a going concern paragraph. 5. Any subsequent events that need disclosure?

Annie

Lil’Orphan Annie has a business called Big Daddy Warbucks, LLC (Hereinafter referred to as “Big D”). She started this business 3 years ago and has been growing each year. It was a tough go the first couple of years but she believes that last year is indicative of what the business can do. For your use, she provided the attached financial statements for the years ending December 31St 2012 and 2011. Shown below are the general formulas and industry standards you will need to analyze and answer Annie’s questions.
Calculate the Following Ratios for Big D
(Round your answers to 2 decimal places) Big D’s Industry
Solvency Ratios:

1. Current Ratio

2. Quick Ratio Leverage Ratios:

3. Debt to Equity

4. Debt to Assets Profitability Ratios:

5. Gross Profit

6. Operating Profit

7. Return on Assets

8. Return on Equity Asset Management Ratios:

9. Inventory Turnover

10. Days of Inventory

11. Accounts Receivable Turnover

12. Days of Accounts Receivable

13. Operating Cycle

14. Asset Turnover

15. If Annie’s inventory proved to be obsolete and un-salable – Would she be able to pay her bills during the next year?
a. Yes
b. No

16. Which ratio did you use to answer #15 above?
a. Current Ratio
b. Operation Profits %
c. Quick Ratio
d. Asset Turnover

17. If she has a product that cost $3.74 per unit and she wants to make the same gross profit that she has – At what price must she sell this product for?
a. 1.25
b. 4.99
c. 0.86
d. 4.68

18. Her mentor Big Daddy Warbucks, is always on the prowl for a good investment and has offered to loan Annie all the money she needs but at an interest rate of 9%. Should she borrow any of this money?
a. Yes
b. No

19. Which ratio did you use to answer #18 above?
a. Operating Cycle
b. Return on Equity
c. Gross Profit %
d. Return on Assets

20. Which of the following ratios would be an indicator that credit terms offer her customers is
very restrictive?
a. Quick Ratio
b. Accounts Receivable Turnover
c. Return on Assets
d. Operating Profit %ACCT 3303

21. Which ratio indicates that Annie is pretty good at managing her expenses?
a. Inventory Turnover
b. Operating Profit %
c. Current Ratio
d. Return on Equity

22. Which ratio indicates that Annie is at risk of being out of stock and missing a sale?
a. Asset Turnover
b. Gross Profit %
c. Quick Ratio
d. Inventory Turnover

23. Which ratio would you use to determine the number of days it takes Annie to turn inventory
into Cash?
a. Operating Cycle
b. Return on Assets
c. Debt to Assets
d. Current Ratio

24. What do plan to do this Thanksgiving?
a. Visit Family and Friends
b. Rest and Relaxation
c. Have Fun
d. Enjoy Life