罗斯公司理财第九版Minicase Solutions

Case Solutions

Fundamentals of Corporate Finance

Ross, Westerfield, and Jordan

9th edition

CHAPTER 1

THE McGEE CAKE COMPANY

1.

The advantages to a LLC are: 1) Reduction of personal liability. A sole proprietor has unlimited

liability, which can include the potential loss of all personal assets. 2) Taxes. Forming an LLC may

mean that more expenses can be considered business expenses and be deducted from the company’s

income. 3) Improved credibility. The business may have increased credibility in the business world

compared to a sole proprietorship. 4) Ability to attract investment. Corporations, even LLCs, can

raise capital through the sale of equity. 5) Continuous life. Sole proprietorships have a limited life,

while corporations have a potentially perpetual life. 6) Transfer of ownership. It is easier to transfer

ownership in a corporation through the sale of stock.

The biggest disadvantage is the potential cost, although the cost of forming a LLC can be relatively

small. There are also other potential costs, including more expansive record-keeping.

2.

Forming a corporation has the same advantages as forming a LLC, but the costs are likely to be

higher.

3.

As a small company, changing to a LLC is probably the most advantageous decision at the current

time. If the company grows, and Doc and Lyn are willing to sell more equity ownership, the

company can reorganize as a corporation at a later date. Additionally, forming a LLC is likely to be

less expensive than forming a corporation.

CHAPTER 2

CASH FLOWS AND FINANCIAL

STATEMENTS AT SUNSET BOARDS

Below are the financial statements that you are asked to prepare.

1.

The income statement for each year will look like this:

Income statement

2008

2009

$247,259

126,038

24,787

35,581

$60,853

7,735

$53,118

10,624

$42,494

$301,392

159,143

32,352

40,217

$69,680

8,866

$60,814

12,163

$48,651

$21,247

21,247

$24,326

24,326

Sales

Cost of goods sold...