Tutorial Pack – Week One
Lecture One/Two
1. From the following balance sheet accounts:
a. construct a balance sheet for 2010 and 2011
b. list all the working capital accounts
c. find the net working capital for the years ending 2010 and 2011
d. calculate the change in net working capital for the year 2011
Balance Sheet Accounts of Athens Corporation
Account
Balance 12/31/2010
Balance 12/31/2011
Accumulated Depreciation
$4,234
$4,866
Accounts Payable
$2,900
$3,210
Accounts Receivable
$3,160
$3,644
Cash
$1,210
$1,490
Common Stock
$4,778
$7,278
Inventory
$4,347
$5,166
Long-Term Debt
$3,600
$2,430
Plant, Property & Equipment
$8,675
$9,840
Retained Earnings
$1,880
$2,356
2. From the following income statement accounts
a. produce the income statement for the year
b. produce the operating cash flow for the year
Income Statement Accounts for the Year Ending 2011
Cost of Goods Sold
$1,419,000
Interest Expense
$ 288,000
Taxes
$ 318,000
Revenue
$2,984,000
SG&A Expenses
$ 454,000
Depreciation
$ 258,000
3. Find the operating cash flow for the year for Shore Brothers Inc. if it had sales revenue of
$440,000,000, cost of goods sold of $215,000,000, sales and administrative costs of
$65,000,000, depreciation expense of $45,000,000, and a tax rate of 40%.
4.
Find the operating cash flow for the year for Stewart and Sons if it had sales revenue
of $100,000,000, cost of goods sold of $40,000,000, sales and administrative costs of
$7,200,000, depreciation expense of $8,300,000, and a tax rate of 30%.
Tutorial Three and Four
1. Present Values. Fill in the present value for the following table
a. Using the present value formula, PV = FV × [1/(1+r)n].
b. Using the time value of money keys or function from a calculator or spreadsheet.
Future Value
Interest Rate
Number of Periods
Present Value
$900.00
5%
5
?
$80,000.00
6%
30
?
$350,000.00
10%
20
?
$26,981.75
16%
15
?
2. Future Value. Upstate University charges $22,500 a year in graduate tuition. Tuition rates are
growing at 5% each year. You plan on enrolling in graduate school in five years. What is your
expected graduate tuition in five years?
3. Future Value. The Portland Stallions professional football team is looking at its future revenue
stream from ticket sales. Currently, a season package costs $550 per seat. The season ticket holders
have been promised this same rate for the next three years. Four years from now, the organization will
raise season ticket prices based on the estimated inflation rate of 4.5%. What will the season tickets
sell for in four years?
4.
Future Value. Jackson Enterprises has just purchased some land for $320,000. The land was
purchased for a future beach front property development project that will include rental cabins, lodge,
and recreational facilities. Jackson Enterprises has not committed to the development project, but will
decide in five years whether to go forward with it or sell off the land. Real estate values increase
annually at 5% for unimproved property in this area. For how much can Jackson Enterprises expect to
sell the property in four years if it chooses not to proceed with the beach front development project?
What if Jackson Enterprises holds the
property for eight years and then sells?
5. Future value: You are a new employee with the Metropolis Daily Planet. The Planet
offers three different retirement plans for you to choose from. Plan 1 starts the first day of
work and puts $1,000 away in your retirement account at the end of every year for forty
years. Plan 2 starts after ten years and puts away $2,000 every year for thirty years. Plan 3
starts after twenty years and puts away $4,000 every year for the last twenty years of
employment. All three plans guarantee an annual growth rate of 8%.
a. Which plan should you choose if you plan to work at the Planet for forty years?
b. Which plan should you choose if you only plan to work at the Planet for the next
thirty years?
c. Which plan should you choose if you only plan to work at the Planet for the next
twenty years?
d. Which plan should you choose if you only plan to work at the Planet for the next ten
years?
e. What do the answers in parts (a) through (d) imply about savings?
Tutorial Five
1. Tyler wants to buy a beach house as part of his investment portfolio. After searching the
coast for a nice home, he finds a house with a great view and a hefty price of $4,500,000.
Tyler will need to borrow from the bank to pay for this house. Mortgage rates are based
on the length of the loan, and a local bank is advertising fifteen-year loans with monthly
payments at 7.125%, twenty-year loans with monthly payments at 7.25%, and thirty-year
loans with monthly payments at 7.375%. What is the monthly payment of principal and
interest for each loan? Tyler believes the property will be worth $5,500,000 in five years.
Ignoring taxes and real estate commissions, if Tyler sells the house after five years, what
will be the difference in the selling price and the remaining principal on the loan for each
of the three loans?