答案和详解如下： 1.For the past three years Paul Schindler, CFA, has worked for Zirconia Capital Management (Zirconia) as a research analyst in the firm’s small cap equity division. Last week, Schindler was promoted to portfolio manager of the Zirconia Small Cap Equity Fund, where he co-manages the fund with Zirconia’s founder, Dick Killen. Over the last three quarters, performance for the Zirconia Small Cap Fund has been excellent, ranking in the top 10 percent of its peer group. Since the fund now has a three year track record, it is showing up in many of the screens run by investment managers and consultants, and assets have been flowing into the fund at a rapid pace. Due to the large influx of assets, Schindler and Killen are considering expanding the number of companies held in their fund and are looking for new investment ideas. One company that looks interesting to them is Bingaman Corporation (Bingaman), a manufacturer of oil and gas exploration equipment. Killen and Schindler have talked to Bingaman’s management and like the story behind the firm. Before taking a position in the firm, the fund managers want to analyze their financial statements to assess the true financial situation at the firm. This will necessarily involve a review of the accounting methods used by Bingaman’s management. Financial statements for Bingaman Corporation for the year ended December 31, 2004, are shown below with relevant footnotes: Balance Sheet
(in $ millions)
| Cash | 35 | Accounts Payable | 60 | Accounts Receivable | 75 | Long Term Debt | 120 | Inventory | 190 | Common Stock | 360 | Equipment | 400 | Retained Earnings | 230 | Real Estate | 50 |
|
| Goodwill | 20 |
|
| |
|
|
| Income Statement
|
|
| (in $ millions)
|
|
| Sales | 600 |
|
| Cost of Goods Sold | (450) |
|
| Depreciation | (50) |
|
| Rent Payments | (20) |
|
| Interest Expense | (10) |
|
| Other Expenses | (20)
|
|
| Net Income | 50 |
|
| |
| Statement of Cash Flows for the period 1/1/2004 – 12/31/2004
(in $ millions)
|
| Cash Flow from Operations (CFO) | 120 |
| Cash Flow from Investing (CFI) | (95) |
| Cash Flow from Financing (CFF) | (10) |
| Change in cash | 15 |
| + Beginning of Period Cash | 20 |
| Ending Cash Balance | 35 |
| | | | | |
§
Inventory is valued under the last in, first out (LIFO) cost flow assumption. The LIFO reserve was $50 million on January 1, 2004 and $60 million on December 31, 2004. §
The firm has operating leases with a present value of $100 million. Rent payments of $20 million equate to $10 million interest expense plus $10 million depreciation expense. §
A class action lawsuit has been filed against Bingaman for environmental contamination of a wildlife reserve. According to Bingaman’s attorney’s, the likely outcome is a $12,000,000 judgment adverse to Bingaman in early 2006. §
Because of an increase in market interest rates during the year, the market value of Bingaman’s long-term debt has changed by $15 million. §
Goodwill is from previous acquisitions. Schindler has determined that Bingaman’s marginal tax rate is 40 percent, and he assumes that that inflation will average 2.5 percent per year over the foreseeable future. Factoring out the impact of LIFO accounting on Bingaman’s 2004 net income, normal net income for the year ended December 31, 2004, would be: A) $40 million. B) $56 million. C) $44 million. D) $54 million. The correct answer was B) During 2004, the LIFO reserve increased from $50 to $60 during the year implying that the higher priced new inventory was passed along, understating net income. To calculate the adjustment, we need to multiply the change in the LIFO reserve by (1 – tax rate). Change in LIFO reserve = (50 – 60) = -10. Change in net income = (-)(-10)(1-0.4) = +$6. To adjust net income we add the $6 to our original value of $50 for an adjusted value of $56. 2.On the 2004 modified balance sheet of Bingaman Corporation, total assets are: A) $910 million. B) $720 million. C) $760 million. D) $880 million. The correct answer was A) Modified total assets are calculated by adding in the fair market value of the operating leases, the LIFO reserve as of December 31, 2004, and subtracting the goodwill from previous acquisitions. ($770 + $60 + $100 - $20) = $910 million. 3.On the 2004 modified balance sheet of Bingaman Corporation, net adjustments to equity are: A) -$16,000,000. B) $6,000,000. C) $43,000,000. D) $14,000,000. The correct answer was C) Bingaman’s modified balance sheet will show the following net adjustments to equity: adding the entire LIFO reserve (due to the assumption of rising prices), less the value of the goodwill from previous acquisitions, less the expected litigation exposure, plus the offset to equity for the decrease in the value of the long term debt due to rising interest rates: (+$60,000,000 - $20,000,000 - $12,000,000 + $15,000,000) = $43,000,000. 4.After restating Bingaman’s 2004 financials, Schindler and Killen analyze the firm’s financial ratios in order to compare Bingaman to other firms in its industry. In discussing the impact of the restatement on the financial ratios, Schindler makes the following four statements: Statement 1: Bingaman’s return on assets will be lower after restating the financials.
Statement 2: Bingaman’s return on equity will be lower after restating the financials.
Statement 3: The current ratio will remain unchanged after restating the financials.
Statement 4: The long-term debt to total asset ratio will increase after restating the financials. After their conversation, Killen tells Schindler that he needs to redo some of his calculations because at least one of his assessments are wrong. Which of the following describes Schindler’s statements? A) Statements 1, 2, and 3 are correct, but statement 4 is incorrect. B) Statements 1 and 4 are correct, but statements 2 and 3 are incorrect. C) Statements 2 and 4 are correct, but statements 1 and 3 are incorrect. D) Statements 1 and 2 are correct, but statements 3 and 4 are incorrect. The correct answer was B) Statement 1 is correct – adjusting for operating leases and adding the LIFO reserve will cause total assets to be higher, which will reduce return on assets (net income/assets). Note that the proportionate increase in assets is higher than the increase in adjusted income, so ROA will decline. Statement 2 is incorrect – the firm’s equity increased from $590 million to $633 million, while the net income increased from $50 million to $56 million. 50/590 = 0.0847 or 8.47%, 56/633 = 0.0885 or 8.85%. Summary of the change in equity: + LIFO reserve + decline in value of the firm’s debt - litigation exposure – goodwill = 60 + 15 – 12 – 20 = $43 million. Change in net income = change in LIFO reserve x (1-T) = 10 (1 – 0.4) = $6 million. Statement 3 is incorrect – the value of inventory will be increased by the LIFO reserve, which will result in a higher level of current assets and a higher current ratio. Statement 4 is correct. Total assets before restatement = $770 million; after restatement = $910 million. Long-term debt before restatement = $120; after restatement = $217. Long-term debt to total assets before restatement = 120/770 = 0.156 or 15.6%; after restatement = 217/910 = 0.238 or 23.8%. Summary of change in total assets: prior assets + LIFO reserve + PV of leases – goodwill = $770 + $60 + $100 - $20 = $910 million. Summary of change in LT debt: prior LT debt + PV of leases + litigation exposure – change in market value of debt = $120 + $100 + $12 - $15 = $217 million. 5.Schindler has determined that fixed capital expenditures for Bingaman are $80 million. What is the free cash flow to the firm (FCFF) ignoring any effects from capitalizing the operating leases? A) -$39,000,000. B) $31,000,000. C) $34,000,000. D) $46,000,000. The correct answer was D) FCFF = CFO + [Interest expense × (1 – tax rate)] - FCInv FCFF = 120 + [10 × (1 - 0.40)] – 80 FCFF = 120 + 6 – 80 FCFF = $46 million | 
发表于 2008-5-20 16:41
| 