Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 19, Problem 13P
Using the information produced in the income statement in Problem 4, use EBITDA as a multiple to estimate the continuation value in 2010, assuming the current value remains unchanged (reproduce Table 19.15). Infer the EV/sales and the unlevered and levered P/E ratios implied by the continuation value you calculated.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
a) Based on the information provided, calculate the following ratios for the years ended 31December 2021 and 2020.You should give the formula for each ratio, in addition to your calculation.I. Gross profit marginII. Operating profit marginIII. Return on equityIV. Current ratioV. Gearing
b) By comparing the financial information for years ended 31 December 2021 and 2020, andreviewing your ratio calculations, comment on the profitability, liquidity, and long-termsolvency of Mabel’s business over the past year. You should use the other information givento suggest reasons for any changes identified.
c)If an investor was interested in buying Mabel’s business and was presented with theseresults, what further advice would you give them?
Question 1
Mabel is a potter and sells her pottery at stalls that she rents in four tourist information centres
across the south of England.
Extracts from her financial statements for the years ended 31 December 2021 and 2020 are
shown below.
Statement of profit or loss for the year ended 31 December:
2021
28,900
|(16,500)
12,400
(3,800)
8,600
|(4,000)
4,600
2020
Revenue
27,200
(14,000)
13,200
(3,600)
9,600
Cost of sales
Gross profit
Operating expenses
Operating profit
Non-operating expenses
Net profit
9,600
Statement of financial position as at 31 December:
2021
Non-current assets
Current assets
Total assets
22,660
4,360
27,020
2020
20,920
3,750
24,670
Equity
Non-current liabilities
Current liabilities
Equity and liabilities
20,940
3,000
3,080
27,020
16,340
3,500
4,830
24,670
The following information is also relevant:
In July 2021 the rent on one of Mabel's stalls was increased significantly for the third time in
three years so she decided not to renew the annual contract. She sold…
How do I set this up? This is a few questions stuck together. Count as multiple questions I think.
4-12 Indicate the effect of the transactions listed in the following table on total current assets, current ration, and net income. Use (+) to indicate an increase, (-) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0.
Table for 4-12
Total Current Assets
Current Ratio
Effect on Net Income
a
Cash is acquired through issuance of additional stock.
b
Merchandise is sold for cash.
c
Federal income tax due for the previous year is paid.
d
A fixed asset is sold for less than book value.
e
A fixed asset is sold for more than book value.
f
Merchandise is sold on credit.
g
Payment is made to…
Chapter 19 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 19.1 - Prob. 1CCCh. 19.1 - Prob. 2CCCh. 19.2 - Prob. 1CCCh. 19.2 - Prob. 2CCCh. 19.3 - What is a pro forma income statement?Ch. 19.3 - Prob. 2CCCh. 19.4 - Prob. 1CCCh. 19.4 - Prob. 2CCCh. 19.5 - Prob. 1CCCh. 19.5 - Prob. 2CC
Ch. 19.6 - Prob. 1CCCh. 19.6 - Prob. 2CCCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Under the assumptions that Idekos market share...Ch. 19 - Prob. 6PCh. 19 - Prob. 7PCh. 19 - Prob. 8PCh. 19 - Prob. 11PCh. 19 - Calculate Idekos unlevered cost of capital when...Ch. 19 - Using the information produced in the income...Ch. 19 - How does the assumption on future improvements in...Ch. 19 - Approximately what expected future long-run growth...Ch. 19 - Prob. 16P
Additional Business Textbook Solutions
Find more solutions based on key concepts
(Evaluating current and proforma profitability) (Financial ratios—investment analysis) The annual sales for Sa...
Foundations Of Finance
The approach by which the put options and call options are used to create portfolio insurance. Introduction: Op...
Corporate Finance
(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 16 percent on a $1...
Foundations of Finance (9th Edition) (Pearson Series in Finance)
The basic features and its uses of floating lien.
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
The basic features and its uses of floating lien.
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Fraud Case 12-1
Bill and Edna had been married two years and had just reached the point where they had enough s...
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Income statements for Campbell Company for Year 3 and Year 4 follow: CAMPBELL COMPANY Income Statements Year 4 Year 3 $180,800 120,400 19,900 14,500 Sales $200,800 Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses 142,400 21,900 12,500 3,900 $180,700 5,900 $160,700 20,100 3,700 Income before taxes 20,100 Income taxes expense 6,500 Net income $ 13,600 $ 16,400 Required a. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. b. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year. Complete this question by entering your answers in the tabs below. Required A Required B Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. (Negative answers should be indicated by a minus sign. Round your percentage answers to 1 decimal place. (i.e., 0.234 should be entered…arrow_forwardA. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. Round percentages to one decimal place. B. What conclusions can be drawn from the horizontal analysis? Round the answers to one decimal place.arrow_forwardRequired: Compute the following: (For Requirements 1 to 4, enter your percentage answers rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 1. Gross margin percentage. 2. Net profit margin percentage. 3. Return on total assets. 4. Return on equity. 5. Was financial leverage positive or negative for the year? 1. Gross margin percentage % 2. Net profit margin percentage % 3. Return on total assets % 4. Return on equity % 5. Financial Leveragearrow_forward
- Direction: Answer the problem below and forecasts the income statement using percent of sales method. (Please refer to the picture)arrow_forwarda) Based on the information provided, calculate the following ratios for the years ended 31December 2021 and 2020. You should give the formula for each ratio, in addition to your calculation.I. Gross profit marginII. Operating profit marginIII. Return on equityIV. Current ratioV. Gearingarrow_forwarda. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.arrow_forward
- Required: (a) You are required to calculate the following ratios:(i) Gross profit margin(ii) Operating profit margin(iii) Expenses to sales(iv) Return on Capital Employed(v) Asset turnover(vi) Non-current asset turnover(vii) Current Ratio(viii) Quick Ratio(ix) Inventory days(x) Receivables days(xi) Payable days(xii) Interest cover (b) In light of your calculations comment on the performance of the company over thelast two years.arrow_forward3. Using the data provided in Table 1, prepare common size income statements using revenues and cost-of-goods-sold in the original S-1 and amended S-1. Analyze trends of expenses as a percentage of revenue for 2009 and 2010. Compare and contrast the following ratios: a. Gross Margin Percentage; b. Asset Turnover Ratio.arrow_forwardchoose: When a balance sheet amount is related to an income statement amount in comparing a ratio a. The ratio losses its historical perspective because at the beginning of the year amount is combined with an end of the year amount. b. The income statement amount should be converted to an average for the year. c. Comparisons should be converted to market value d. The balance sheet amount should be converted to an average for the year.arrow_forward
- Compute the following ratio analysis: Return on Equity Return on Assets Gross Profit Margin Write your interpretation after the computation.arrow_forwardDescribe the trend of operating income from 2007 to 2010. What observations can be drawn? Describe the trend of net income from 2007 to 2010. What observations can be drawn?arrow_forwardCompute the following for year 2: 2-a. Percentage markup on sales. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4) 2-b. Income tax rate. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).) 2-c. Net profit margin ratio. Was it a good or poor indicator of performance? (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) 2-d. Percentage of total resources invested in property, plant, and equipment. (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) 2-e. Debt-to-equity ratio. Interpret the result. (Round the final answer to 2 decimal places.) 2-f. Return on assets. Assume that long-term debt increased to $36,810 in month 1 of year 2. (Round intermediate calculations to 3 decimal places and percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) 2-g. Return on equity. (Round percentage answer to 2 decimal places (i.e.,…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License