Graffiti Advertising, Inc., reported the following financial statements for the last two years.
  

a. Calculate the operating cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Operating cash flow            $
  
b. Calculate the change in net working capital. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Change in net working capital            $
  
c. Calculate the net capital spending. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Net capital spending            $
  
d. Calculate the cash flow from assets. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow from assets            $

e. Calculate the cash flow to creditors. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to creditors            $

f. Calculate the cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to stockholders            $

1. Assume there are two competitor firms, ABC and XYZ. ABC had no credit losses last year, but 1% of XYZ’s accounts receivable proved to be uncollectible and resulted in losses. Can you determine which firm’s credit manager is performing better? Why or why not? (2pts)

2. Indicate by a (+), (-), or (0) whether each of the following events would most likely cause A/R, sales, and profits to increase, decrease, or be affected in an indeterminate manner. Also provide an explanation for each event and the affects. (7pts)

AR              Sales Profit

a. The firm tightens its credit

standards.                                                                                                             

b. The terms of trade are

changed from 2/10, net 30,

to 3/10, net 30.                                              

c. The terms are changed from

2/10 net 30, to 3/10, net 40.                                             

d. The credit manager gets tough

with past-due accounts.      

Explanations:

3. On March 1, Minnerly Motors obtains business loan from a local bank. The loan is a $50,000 interest-only loan with a nominal rate of 9%. Interest is calculated on a simple interest basis with a 365-day year. What is Minnerly’s interest charge for the first month (assuming 31 days in the month)? You must show all calculations to receive credit. (2pts)

4. Cost of Bank Loans. Del Hawley, owner of Hawley’s Hardware, is negotiating with First City Bank for a 1-year loan of $40,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual interest rate for each alternative. You must show calculations to receive full credit. (6pts)

5. • A 11% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year.

5. • A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year.

5. • An 8.75% annual rate on a discounted loan, with a 15% compensating balance.

5. Monitoring of Receivables. The Russ Fogler company, a small manufacturer of cordless telephones, began operations on January 1. Its credit sales for the first 6 months of operations were as follows:

Month Credit Sales

January $120,000

February 100,000

March 50,000

April 160,000

May 140,000

June 105,000

Throughout this entire period, the firm’s credit customers maintained a constant payments pattern; 20% paid in the month of sale, 30% paid in the first month following the sale, and 50% paid in the second month following the sale.

1. What was Fogler’s receivables balance at the end of March and at the end of June? You must show calculations to receive full credit. (2pts)

2. Assume 90 days per calendar quarter. What were the ADS and DSO for the first and second quarter? You must show calculations to receive full credit. (3pts)

3. Construct an aging schedule as of June 30. Use account ages of 0-30, 31-60, and 61-90 days. You must show calculations to receive full credit. (3pts)

4. Construct the uncollected balances schedule for the second quarter as of June 30. You must show calculations to receive full credit. (3pts)

Assume there are two competitor firms, ABC and XYZ. ABC had no credit losses last year, but 2% of XYZ’s accounts receivable proved to be uncollectible and resulted in losses. Should XYZ fire its credit manager and hire ABC’s? Defend your response. (2pts)

Indicate by a (+), (-), or (0) whether each of the following events would probably cause A/R, sales, and profits to increase, decrease, or be affected in an indeterminate manner. Also provide an explanation for each event and the affects. (7pts)

AR Sales Profit

a.   The firm tightens its credit

standards.                                             __                 __               __

b.   The terms of trade are

changed from 2/10, net 30,

to 3/10, net 30.                                     __                 __               __

c.   The terms are changed from            

2/10 net 30, to 3/10, net 40.                   __                __               __                                     

d.   The credit manager gets tough

with past-due accounts                        __                 __               __

On March 1, Minnerly Motors obtains business loan from a local bank. The loan is a $25,000 interest-only loan with a nominal rate of 11%. Interest is calculated on a simple interest basis with a 365-day year. What is Minnerly’s interest charge for the first month (assuming 31 days in the month)? You must show calculations to receive full credit. (2pts)

Cost of Bank Loans. Del Hawley, owner of Hawley’s Hardware, is negotiating with First City Bank for a 1-year loan of $50,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual interest rate for each alternative. You must show calculations to receive full credit. (6pts)

A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year.

A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year.

An 8.75% annual rate on a discounted loan, with a 15% compensating balance.

Monitoring of Receivables. The Russ Fogler company, a small manufacturer of cordless telephones, began operations on January 1. Its credit sales for the first 6 months of operations were as follows:

Month              Credit Sales

January             $ 50,000

February           100,000

March               120,000

April                 105,000

May                 140,000

June                 160,000

Throughout this entire period, the firm’s credit customers maintained a constant payments pattern; 20% paid in the month of sale, 30% paid in the first month following the sale, and 50% paid in the second month following the sale.

What was Fogler’s receivables balance at the end of March and at the end of June? (You must show calculations to receive full credit. (2pts)

Assume 90 days per calendar quarter. What were the ADS and DSO for the first and second quarter? You must show calculations to receive full credit. (3pts)

Construct an aging schedule as of June 30. Use account ages of 0-30, 31-60, and 61-90 days. You must show calculations to receive full credit. (3pts)

Construct the uncollected balances schedule for the second quarter as of June 30. You must show calculations to receive full credit. (3pts)

in java: In my code at have my last two methods that I cannot exactly figure out how to execute. I have too convert a Roman number to its decimal form for the case 3 switch. The two methods I cannot figure out are the public static int valueOf(int numeral) and public static int convertRomanNumber(int total, int length, String numeral). This is what my code looks like so far:

public static void main(String[] args) {

// TODO Auto-generated method stub

Scanner in = new Scanner(System.in);

String fName = "";

String lName = "";

double hoursWorked = 10;

double hourlyRate = 10;

double regularPay = 10;

double overtimeHours = 10;

int choice;

System.out.println("Calculator Menu");

System.out.println("1) Wage Calculator");

System.out.println("2) Coupon Calculator");

System.out.println("3) Roman Number Converter");

System.out.println("4) Exit");

System.out.println("");

System.out.println("Enter choice: ");

choice = in.nextInt();

switch(choice) {

case 1:

System.out.println("Enter first name: ");

fName = in.next();

System.out.println("Enter last name: ");

lName = in.next();

System.out.println("Enter hourly rate: ");

hourlyRate = in.nextDouble();

System.out.println("Enter hours worked: ");

hoursWorked = in.nextDouble();

System.out.printf("Name: " + fName + "," + lName);

System.out.println("");

wageCalculator(hoursWorked, overtimeHours, hourlyRate, regularPay);

break;

case 2:

double purchaseAmount;

int purchaseType;

final double autoP = 1;

final double frag = 2;

final double acc = 3;

System.out.println("Enter purchase amount: ");

purchaseAmount = in.nextDouble(); {

System.out.println("Choose purchase type: ");

System.out.println("1) Auto Parts");

System.out.println("2) Fragrances");

System.out.println("3) Accessories");

purchaseType = in.nextInt();

}

couponCalculator(purchaseType, purchaseAmount, autoP, frag, acc);

break;

case 3:

double calc_w;

/*

int length = Integer.toString(numeral).length();

System.out.println("Please enter Roman Number: ");

*/ String numeral = null;

int total = 0;

int length = numeral.length();

System.out.print("Enter roman numeral to convert: ");

numeral =in.next();

// total = convertNum(romanNum);

System.out.println("The roman numeral converted is: " + total);

total = in.nextInt();

// Method valueOf - Gives the value of the Roman numeral @param numeral a single Roman numeral

// @return the decimal value of numeral

//promp user to enter roman number

// then convert it to regular number

convertRomanNumber(total, length, numeral);

break;

case 4:

// exit program

System.out.println("Thank you for using our program. Have a great day!");

}

}

public static void wageCalculator(double hoursWorked, double overtimeHours, double hourlyRate, double regularPay) {

// TODO Auto-generated method stub

double overtimePay = 0;

if (hoursWorked > 40) {

overtimeHours = hoursWorked - 40;

System.out.println("Overtime hours: " + overtimeHours);

overtimePay = overtimeHours*(1.5*hourlyRate);

System.out.println("Overtime Pay: " + overtimePay);

System.out.printf("Total Pay $%.2f", regularPay + overtimePay);

hoursWorked = 40;

}

regularPay = hourlyRate*hoursWorked;

System.out.println("Regular hours worked: " + hoursWorked);

System.out.println("Regular Pay: $" + regularPay);

System.out.printf("Total Pay $%.2f", regularPay + overtimePay);

}

// add all variables to method header

public static void couponCalculator(int purchaseType, double purchaseAmount, double autoP, double frag, double acc) {

if (purchaseType == autoP) {

System.out.println("Your coupon is: $" + purchaseAmount*.10 + "(Auto Parts)");

} if (purchaseType == frag) {

System.out.println("Your coupon is: $" + purchaseAmount*.15 + "(Fragrances)");

} if (purchaseType == acc) {

System.out.println("Your coupon is: $" + purchaseAmount*.20 + "(Accessories)");

}

}

public static int convertRomanNumber(String str) {

}

return total;

}

public static int valueOf(char numeral) {

if (numeral == 'I') {

return 1;

}

if (numeral == 'V') {

return 5;

} if (numeral == 'X') {

return 10;

} if (numeral == 'L') {

return 50;

} if (numeral == 'C') {

return 100;

} if

(numeral == 'D')

return 500;

else if (numeral == 'M')

return 1000;

return numeral;

}

}

Calculating Residual Income

Forchen, Inc., provided the following information for two of its divisions for last year:

Forchen, Inc., requires an 6 percent minimum rate of return.

Required:

1. Calculate residual income for the Small Appliances Division.

$ ___________

2. Calculate residual income for the Cleaning Products Division.

$ ___________

3. What if the minimum required rate of return was 7 percent? How would that affect the residual income of the two divisions?

Last year, two friends Gear and Nogear invested in residential apartments. Each invested $1m of their own money (their net wealth).

Apartments cost $1m last year and they earned net rents of $30k pa over the last year. Net rents are calculated as rent revenues less the costs of renting such as property maintenance, land tax and council rates. However, interest expense and personal income taxes are not deducted from net rents.

Gear and Nogear funded their purchases in different ways:

Gear used $1m of her own money and borrowed $4m from the bank in the form of an interest-only loan with an interest rate of 5% pa to buy 5 apartments.

Nogear used $1m of his own money to buy one apartment. He has no mortgage loan on his property.

Both Gear and Nogear also work in high-paying jobs and are subject personal marginal tax rates of 45%. Assume that capital gains are taxed at the full 45% personal rate when the asset is sold.

Over the past year, house prices increased by 4%, before subtracting capital gains tax (CGT).

Gear and Nogear both sold their houses and Gear paid back all debt.

Which of the below statements about the past year is NOT correct? Note that m stands for million (10^6) and k stands for kilo (10^3).

Select one:

a. Gear's debt-to-assets ratio one year ago was 80% while Nogear's was zero.

b. Gear's net rent before tax was 150k while Nogear's was 30k.

c. Gear's capital gains before tax were 200k while Nogear's was 40k.

d. Gear's interest expense before tax was 250k while Nogear's was zero.

e. Gear's income and capital gains after tax due to the investment properties (ignoring opportunity costs) was 82.5k while Nogear's was 38.5k.

Last year, two friends Gear and Nogear invested in residential apartments. Each invested $1m of their own money (their net wealth).

Apartments cost $1m last year and they earned net rents of $30k pa over the last year. Net rents are calculated as rent revenues less the costs of renting such as property maintenance, land tax and council rates. However, interest expense and personal income taxes are not deducted from net rents.

Gear and Nogear funded their purchases in different ways:

Gear used $1m of her own money and borrowed $4m from the bank in the form of an interest-only loan with an interest rate of 5% pa to buy 5 apartments.

Nogear used $1m of his own money to buy one apartment. He has no mortgage loan on his property.

Both Gear and Nogear also work in high-paying jobs and are subject personal marginal tax rates of 45%. Assume that capital gains are taxed at the full 45% personal rate when the asset is sold.

Over the past year, house prices increased by 4%, before subtracting capital gains tax (CGT).

Gear and Nogear both sold their houses and Gear paid back all debt.

Which of the below statements about the past year is NOT correct? Note that m stands for million (10^6) and k stands for kilo (10^3).

Select one:

a. The net rental return on house assets before tax was 3% and after tax was 1.65% pa.

b. The net capital return on house assets before tax was 4% and after tax was 2.2% pa.

c. The interest rate on debt before tax was 5% and after tax was 2.75% pa.

d. The return on equity for Nogear before tax was 7% and after tax was 3.85% pa.

e. The return on equity for Gear before tax was 15% and after tax was 5.5% pa.

Last year, two friends Gear and Nogear invested in residential apartments. Each invested $1m of their own money (their net wealth).

Apartments cost $1m last year and they earned net rents of $25k pa over the last year. Net rents are calculated as rent revenues less the costs of renting such as property maintenance, land tax and council rates. However, interest expense and personal income taxes are not deducted from net rents.

Gear and Nogear funded their purchases in different ways:

Gear used $1m of her own money and borrowed $3m from the bank in the form of an interest-only loan with an interest rate of 3% pa to buy 4 apartments.

Nogear used $1m of his own money to buy one apartment. He has no mortgage loan on his property.

Both Gear and Nogear also work in high-paying jobs and are subject personal marginal tax rates of 45%. Assume that capital gains are taxed at the full 45% personal rate when the asset is sold.

Over the past year, house prices increased by 1%, before subtracting capital gains tax (CGT).

Gear and Nogear both sold their houses and Gear paid back all debt.

Which of the below statements about the past year is NOT correct? Note that m stands for million (10^6) and k stands for kilo (10^3).

Select one:

a. Gear's debt-to-assets ratio one year ago was 75% while Nogear's was zero.

b. Gear's net rent before tax was 100k while Nogear's was 25k.

c. Gear's capital gains before tax were 30k while Nogear's was 10k.

d. Gear's interest expense before tax was 90k while Nogear's was zero.

e. Gear's income and capital gains after tax due to the investment properties (ignoring opportunity costs) was 27.5k while Nogear's was 19.25k.