Case #1Case #1You are a Financial Analyst working for Joe Doe, Inc. Joe Doe Inc. makes widgets. The CFO at Joe Doe asks you to provide information for his perusal. 1.A. Calculate all ratios for Joe Doe Inc. for the year 2002 and list them under the column headed – Joe Doe 2002. Round all answers to two digits after the decimal.B. For all ratios, except Debt Ratio, Price/Earnings, Price/Cash Flow, Book Value per Share and Market/ Book, determine whether Joe Doe 2002 ratios were Better, Worse or Same in the last two columns. Example: Historical Comparison – (Joe Doe 2002 relative to Joe Doe 2001), if the Current Ratio in 2002 is lower, than write in Worse in the historical column.C. For the following ratios: Debt Ratio, Price/Earnings, Price/Cash Flow, Book Valueper Share and Market/ Book determine whether the 2002 ratios were Higher, Loweror Same in the last two columns.FIN 300 – Case #1 Page 1Joe Doe Joe Doe Industry Historical Relative to2001 2002 2002 Comparison IndustryCurrent Ratio 1.84 2.03Quick Ratio 1.10 1.29Inventory Turnover 8.23 9.17Days Sales Outstanding 47.66 40.86Fixed Asset Turnover 4.71 5.00Total Asset Turnover 1.95 2.00Debt Ratio 48.65% 45.00%Times Interest Earned 6.98 8.25EBITDA Coverage 2.99 3.42Profit Margin on Sales 3.98% 4.35%BEP 15.08% 16.50%Return on Total Assets 7.75% 8.70%Return on Common Equity 15.09% 15.82%Price/Earnings 12.55 12.64Price/Cash Flow 6.47 6.79Book Value Per Share 47.50 55.00Market/Book 1.89 2.00Historical and Industry Average RatiosJoe Doe, Inc.2. Based on the following assumptions, fill in the worksheet provided on the next page.Company is running at full capacity.All assets as well as depreciation are proportional to sales.A/P & Accruals is the only liability item to change proportionally to sales.The Payout Ratio is 25%.Additional Funds Needed will be finance by 70% increase in N/P and 30% increase in Long-term Debt.Sales are expected to increase by 10%.A. Using the worksheet what is the AFN?B. Using the formula what is the AFN, assume the Profit Margin is 4.05%?C. Explain the difference of AFN between the two methods.FIN 300 – Case #1 Page 2D. Suppose Joe Doe Inc. in 2002 is operating at 80% capacity. What is Capacity Sales?E. Assuming information from the previous question, if sales increased to $2800 (millions), how much additional fixed assets would be required?F. Calculate Free Cash Flow for Joe Doe Inc. for 2002.FIN 300 – Case #1 Page 3FIN 300 – Case #1 Page 4Assets2002 Forecast Basis 2003ECash$95.00A/R$237.00Inventories$243.00Total Current Assets$575.00Gross FA$500.00Less: Depreciation$75.00Net FA$425.00Total Assets$1,000.00LiabilitiesA/P & Accruals$175.00N/P$170.00Total Current Liabilities$345.00Long-Term Debt$155.00Total Liabilities$500.00EquityCommon Stock$250.00Retained Earnings$250.00Total Equity$500.00Total Liabilities & Equity$1,000.002002 Forecast Basis 2003ESales$2,000.00COGS$1,600.00Gross Margin$400.00Other Expenses ex. Depr.& Amort.$170.00EBITDA$230.00Depr. & Amort.$75.00EBIT$155.00Interest Expense$20.00EBT$135.00Taxes 40%$54.00Net Income (EAT)$81.00Dividends 25%$20.25Additions to RE$60.75Balance Sheet - Worksheet(in millions)Income Statement (in millions)Modified Financial StatementsBalance SheetJoe Doe, Inc. (in millions) Assets 2001 2002 Cash $85.50 $95.00 A/R $238.30 $237.00 Inventories $218.70 $243.00 Total Current Assets $542.50 $575.00 Net FA $382.50 $425.00 Total Assets $925.00 $1,000.00 Liabilities A/P & Accruals $157.50 $175.00 N/P $137.50 $170.00 Total Current Liabilities $295.00 $345.00 Long-Term Debt $155.00 $155.00 Total Liabilities $450.00 $500.00 Equity Common Stock $250.00 $250.00 Retained Earnings $225.00 $250.00 Total Equity $475.00 $500.00 Total Liabilities & Equity $925.00 $1,000.00 Income Statement (in millions) 2001 2002 Sales $1,800.00 $2,000.00 COGS $1,440.00 $1,600.00 Gross Margin $360.00 $400.00 Other Expenses ex. Depr.& Amort. $153.00 $170.00 EBITDA $207.00 $230.00 Depr. & Amort. $67.50 $75.00 EBIT $139.50 $155.00 Interest Expense $20.00 $20.00 EBT $119.50 $135.00 Taxes 40% $47.80 $54.00 Net Income (EAT) $71.70 $81.00 Dividends 25% $17.93 $20.25 Additions to RE $53.78 $60.75 Other Data Actual # of Shares 10,000,000 10,000,000 EPS $7.17 $8.10 Stock Price $90.00 $110.00 Lease Pmts (in Millions) $40 $40 Cash Flow per share $13.92 $15.60 FIN 300 – Case #1 Page