kaplan 550 unit 4 assignments
Question # 00004102
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Updated on: 11/25/2013 04:01 PM Due on: 11/28/2013
GB550: Financial Management
There are two Assignments due in Unit 4.
Assignment 1 of 2:
Complete Chapter 25 question, 251, p. 1005
Complete Chapter 25 problem, 252, p. 1007
Prepare this Assignment as a Word document. List each question, followed by your answer.
Directions for Submitting Assignment 1
Compose your Assignment in a MS Word document and save it as UsernameGB550 Assignment 1Unit#.doc (Example: TAllen GB550 Assignment 1Unit 4.doc). Submit your file by selecting the Unit 4: Assignment 1 Dropbox by the end of Unit 4.
Assignment 2 of 2:
Please complete all parts of spreadsheet problem 215 on page 89. It is recommended that you complete the problem using the Excel template located in Doc Sharing.
Directions for Submitting Assignment 2
Compose your Assignment in a MS Excel document and save it as UsernameGB550 Assignment 2Unit#.doc (Example: TAllen GB550 Assignment 2Unit 4.doc). Submit your file by selecting the Unit 4: Assignment 2 Dropbox by the end of Unit 4.
Assignment 1
251) Define the following terms, using graphs or equations to illustrateyour answers wherever feasible:
a) Portfolio; feasible set; efficient portfolio; efficient frontier
b) Indifference curve; optimal portfolio
c) Capital Asset Pricing Model (CAPM); Capital Market Line (CML)
d) Characteristic line; beta coeffiecient, b
e) Arbitrage Pricing Theory (APT)
252) An analyst has modeled the stock of Crisp Trucking using a twofactor APT model. The riskfree is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1=0.7 and bi20.9, what is Crisp's required return?
Assignment 2
problem 215 on page 89
There are two Assignments due in Unit 4.
Assignment 1 of 2:
Complete Chapter 25 question, 251, p. 1005
Complete Chapter 25 problem, 252, p. 1007
Prepare this Assignment as a Word document. List each question, followed by your answer.
Directions for Submitting Assignment 1
Compose your Assignment in a MS Word document and save it as UsernameGB550 Assignment 1Unit#.doc (Example: TAllen GB550 Assignment 1Unit 4.doc). Submit your file by selecting the Unit 4: Assignment 1 Dropbox by the end of Unit 4.
Assignment 2 of 2:
Please complete all parts of spreadsheet problem 215 on page 89. It is recommended that you complete the problem using the Excel template located in Doc Sharing.
Directions for Submitting Assignment 2
Compose your Assignment in a MS Excel document and save it as UsernameGB550 Assignment 2Unit#.doc (Example: TAllen GB550 Assignment 2Unit 4.doc). Submit your file by selecting the Unit 4: Assignment 2 Dropbox by the end of Unit 4.
Assignment 1
251) Define the following terms, using graphs or equations to illustrateyour answers wherever feasible:
a) Portfolio; feasible set; efficient portfolio; efficient frontier
b) Indifference curve; optimal portfolio
c) Capital Asset Pricing Model (CAPM); Capital Market Line (CML)
d) Characteristic line; beta coeffiecient, b
e) Arbitrage Pricing Theory (APT)
252) An analyst has modeled the stock of Crisp Trucking using a twofactor APT model. The riskfree is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1=0.7 and bi20.9, what is Crisp's required return?
Assignment 2
problem 215 on page 89
a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recent year.  
Lan & Chen Technologies: Income Statements for Year Ending December 31  
(Thousands of Dollars)  2013  2012  
Sales  $945,000  $900,000  
Expenses excluding depreciation and amortization  812,700  774,000  
EBITDA  $132,300  $126,000  
Depreciation and amortization  33,100  31,500  
EBIT  $99,200  $94,500  
Interest Expense  10,470  8,600  
EBT  $88,730  $85,900  
Taxes (40%)  35,492  34,360  
Net income  $53,238  $51,540  
Common dividends  $43,300  $41,230  
Addition to retained earnings  $9,938  $10,310  
Lan & Chen Technologies: December 31 Balance Sheets  
(Thousands of Dollars)  
Assets  2013  2012  
Cash and cash equivalents  $47,250  $45,000  
Shortterm investments  3,800  3,600  
Accounts Receivable  283,500  270,000  
Inventories  141,750  135,000  
Total current assets  $476,300  $453,600  
Net fixed assets  330,750  315,000  
Total assets  $807,050  $768,600  
Liabilities and equity  
Accounts payable  $94,500  $90,000  
Accruals  47,250  45,000  
Notes payable  26,262  9,000  
Total current liabilities  $168,012  $144,000  
Longterm debt  94,500  90,000  
Total liabilities  $262,512  $234,000  
Common stock  444,600  444,600  
Retained Earnings  99,938  90,000  
Total common equity  $544,538  $534,600  
Total liabilities and equity  $807,050  $768,600  
Key Input Data  
Tax rate  40%  
Net operating working capital  
2013  NOWC =  Operating current assets    Operating current liabilities  
2013  NOWC =    
2013  NOWC =  
2012  NOWC =  Operating current assets    Operating current liabilities  
2012  NOWC =    
2012  NOWC =  
Total net operating capital  
2013  TOC =  NOWC  +  Fixed assets  
2013  TOC =  +  
2013  TOC =  
2012  TOC =  NOWC  +  Fixed assets  
2012  TOC =  +  
2012  TOC =  
Investment in total net operating capital  
2013  2012  
2013  Inv. In TOC =  TOC    TOC  
2013  Inv. In TOC =    
2013  Inv. In TOC =  
Net operating profit after taxes  
2013  NOPAT =  EBIT  x  ( 1  T )  
2013  NOPAT =  x  
2013  NOPAT =  
Free cash flow  
2013  FCF =  NOPAT    Net investment in operating capital  
2013  FCF =    
2013  FCF =  
Return on invested capital  
2013  ROIC =  NOPAT  /  Total net operating capital  
2013  ROIC =  /  
2013  ROIC =  
b. Assume that there were 15 million shares outstanding at the end of the year, the yearend closing stock price was $65 per share, and the aftertax cost of capital was 8%. Calculate EVA and MVA for the most recent year.  
Additional Input Data  
Stock price per share  $65.00  
# of shares (in thousands)  15,000  
Aftertax cost of capital  8.0%  
Market Value Added  
MVA =  Stock price  x  # of shares    Total common equity  
MVA =  x    
MVA =    
MVA =  
Economic Value Added  
EVA =  NOPAT    (Operating Capital  x  Aftertax cost of capital)  
EVA =    x  
EVA =    
EVA =  

Rating:
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Solution: Gb550 unit 4 assignment 1 and 2