Analysis 3 Homework

Name: _________________________________

Assignment

1. This year Baldwin achieved an ROE of 43.4%. Suppose the Board of Directors of Baldwin mandates that management take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, and Assets remain the same next year, what effect would you expect this new Leverage policy will have on Baldwin ROE?

( ) Baldwin ROE will decrease.
( ) Baldwin ROE will increase.
( ) Baldwin ROE will remain the same

2. Currently Digby is paying a dividend of $21.05 (per share). If this dividend were raised by $3.64, given its current stock price what would be the Dividend Yield?

3. Chester Corporation’s cash flow statement shows an increase in cash of $1,847,357.  Which of the following transactions could have contributed to the cash increase?

( ) A decrease in accounts payable
( ) A decrease in accounts receivable
( ) A decrease in long term bonds
( ) An increase in inventory

4. The Digby company will sell 100 units (x1000) of capacity from their Dell product line. Each unit of capacity is worth $6 plus $4 per automation rating. The Digby company will sell the capacity for 35% off. How much do they receive when the capacity is sold?

5. Which product had the lowest combined per unit material and labor costs at the end of last year in the Traditional segment?

6. In order to sell a product at a profit the product must be priced higher than the total of what it costs you to build the unit, plus period expenses, and plus overhead.  At the end of last year the Erie had a product Eat. Use the Production Analysis to find Eat's production cost, (labor+materials). Exclude possible inventory carrying costs. Assume period expenses and overhead total 1/2 of their production cost. What is the minimum price the product could have been sold for to cover the unit cost, period expenses, and overhead?

7. Last year the Ferris company increased their equity. Two years ago their equity was $37,669. Last year it increased to $41,399.  What are the causes of this change in equity? Check all that apply.

[ ] Profits of $14,373
[ ] Depreciation of -$34,185
[ ] Issue and retirement of stock .
[ ] A bond issue of $2,928.
[ ] Dividend payment of $10,643.
[ ] Change in inventory of -$1,348.
[ ] An accounts payable change of $1,460.
[ ] A change in short term debt of -$5,882.
[ ] A change of plant and equipment of $10,310.
[ ] A change in cash of -$4,845.
[ ] Plant Improvements of $10,310

8. The Andrews company currently has the following balances in their equity accounts:

Common Stock $11,121
Retained earnings $41,044

Suppose next year the Andrews company generates $46,300 in Net Profit, and declares and pays $16,000 in Dividends. What will Andrews ending balance in Retained Earnings be next year?

9. Which description best fits Erie's strategy? For clarity:

- A differentiator competes through good designs, high awareness, and easy accessibility.
- A cost leader competes on price by reducing costs and passing the savings to customers.
- A broad player competes in all parts of the market.
- A niche player competes in selected parts of the market.

10. If Andrews were to increase their workforce complement by 10% (rounded to the nearest person), how much will the company spend in total on benefits next year?

Deliverables

1. Answers to the above problems