Finance Midterm

The CFO-to-Debt Ratio and the Debt to Total Capital Ratio will contribute to the increase of total yield, since the lower CFO-to-Debt Ratio means the firm does not generate enough cash internally to pay off the debt. Also, the higher Debt-to-Total Capital Ratio will increase the riskiness of the firm and affect the total yield. |

(c) |

As it is indicated above, 10 basis points will be increased by not satisfying quality standards, since there are two standards not meeting the standard, 20 basis points will be increased after the new debt issued. |

Problem 2

(a) Statement of Cash Flow for Codell Machine Corporation 2010

Operating Activities | Amount | |

Net Income | $1484 | |

Adjustment: | | |

Depreciation | 318 | Add from income statement |

Deferred tax | 218 | |

Changes in working Capital: | | |

Change in accounts receivable | (62) | 856-918 |

Changes in other assets | (18) | |

Change in inventories | 28 | 850-822 |

Change in accounts payable | 34 | 490-524 |

Change in accruals | (198) | 514-316 |

Net cash flows from operating activities (CFO) | 1804 | Sum |

Investing Activities | Amount | |

Cash used to acquire fixed assets | (1294) | 5262-4076+1016-908 |

Net cash flows from investing activities (CFI) | (1294) | |

Financing Activities | Amount | |

Change in note payable | 10 | 142-132 |

Change in long-term debt | 40 | 1512-1472 |

Change in common stock | 2 | 162-160 |

Change in preferred stock | 0 | 26-26 |

Change in capital surplus | 20 | 1018-998 |

Payment of cash dividends | (424) | |

Treasury stock | (80) | 242-162 |

Net cash flows from financing activities (CFF) | (432) | |

Total Cash Flow=CFO+CFI+CFF=1804-129-432=78

(b)

(c)

Based on the analysis of the funds performances, Fund Manager should receive more allocation of additional capital in accordance in fund ranking, fund 4 receive more and then fund 2, fund 1, fund 5 and fund 3 receive the least.

(d)

Codell...