finance assignment 2
Page 1 of 6 FNCE 370v8: Assignment 2 Assignment 2 is worth 5% of your final mark. Complete and submit Assignment 2 after you complete Lesson 6. There are 15 questions in this assignment. The break-down of marks for each question is presented in the table below. Please show all your work as this will help the marker give you part marks as well as serve as a good study aid as you prepare for the Final Examination. Question Marks Available Reference 1 10 Lesson 2 2 5 Lesson 2 3 3 Lesson 2 4 8 Lesson 3 5 6 Lesson 3 6 6 Lesson 3 7 5 Lesson 4 8 10 Lesson 4 9 15 Lesson 4 10 5 Lesson 5 11 5 Lesson 5 12 5 Lesson 5 13 5 Lesson 6 14 5 Lesson 6 15 7 Lesson 6 Total 100 Page 2 of 6 1. We have the following information for Athabasca Inc. (10 marks) Athabasca, Inc. 2010 Income Statement ($ in millions) Net Sales $1,384 Less: Cost of Goods Sold 605 Less: Depreciation Earnings before interest and taxes 599 180 Less: Interest paid Taxable Income 519 80 Less: Taxes Net Income $ 363 156 Addition to retained earnings $ 254 Cash dividends paid 109 Athabasca, Inc. 12/31/09 and 12/31/10 Balance Sheet ($ in millions) 2009 2010 2009 2010 Cash $ 100 $ 121 Accounts payable $ 400 $ 350 A/R 350 425 Notes payable 390 370 Inventory 440 410 Total CL $ 790 $ 720 Total CA $ 890 $ 956 Long-term debt 500 550 Net fixed assets 1,556 1,704 Owner’s equity Common stock 600 580 Retained Earnings 556 810 Total assets $2,446 $2,660 Total liabilities $2,446 $2,660 The firm has 180 million common shares outstanding. Calculate the following: a. Earnings retention ratio for 2010. b. The dividend to be paid (in dollars) in 2011. Assume Athabasca is projecting a 20% increase in sales for the coming year, and that cost of goods sold and general/administrative expenses remain a constant percentage of sales. Also assume that depreciation, interest paid, and the firm’s tax rate remain unchanged and that the firm’s dividend payout is 40%. c. Capital intensity ratio based on the 2010 results. d. Full capacity sales if...