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Fin 3320 Problem Set Template

FINANCIAL DATA - Deere & Co
SECTION 1- ANALYZING PERFORMANCE
Income Statement (millions)

2012

Total Revenue
COGS
Operating Expenses
Interest Expense

2013

23,112
16,255
4,476
1,042

Income Tax Expense

460

Net Income

26,005
17,399
4,769
811
1,162

879

1,864

Cash
Accounts Receivables
Inventory
All other current assets
Total Current Assets

7,760
18,775
2,397
1,925
30,857

3,791
24,349
3,063
228
31,431

LongTerm Assets
All Other Items

10,275
-

11,836
-

Total Assets

41,133

43,267

Accounts Payable
CP Long term debt
All other items
Total Current Liabilities

5,594
7,159
12,753

6,830
7,535
14,364

Long Term Debt

Other Liabilities
Total Long Term Liabilities

17,392
6,170
23,561

16,815
5,798
22,613

Total Liabilities

36,314

36,977

4,819

6,290

Balance Sheet (millions)

Total Equity
Common Shares Outstanding (000s)
Dividends Paid (millions)

(assume constant for 2012-2014)

$

473 $

484

Shirin Khorrami

2012 - 2014
CAGR

2014
1)
32,013
21,919
5,111
759
1,424

76%

2,799

78%

3,647
27,502
4,371
787
36,307

-31%
21%
35%
-36%
8%

11,901
-

8%

48,207

8%

8,091
9,630
17,721

20%
16%

16,960
6,727
23,687

-1%
4%
0%

41,407

7%

6,800

19%

401,830
$

18%
16%
7%
-15%

593

18%

COMMON SIZE INCOME STMT & BAL SHEET

Percentage of Total Calculations

2012
2013

2014

2)
100%
70%
19%
5%

100%
67%
18%
3%

100%
68%
16%
2%

2%

4%

4%

4%

7%

9%

19%
46%
6%
5%
75%

9%
56%
7%
1%
73%

8%
57%
9%
2%
75%

25%
0%

27%
0%

25%
0%

100%

100%

100%

15%
20%
0%
35%

18%
20%
0%
39%

20%
23%
0%
43%

48%
17%
65%

45%
16%
61%

41%
16%
57%

100%

100%

100%

100%

100%

100%

Name:
3)

2012

Cash Ratio
Quick Ratio
Current Ratio
4)

Debt to Equity
Equity Multiplier
Days Receivable
Days Inventory
5)
Days Payable
Net Working Capital

Cash Conversion Cycle

6)

2013
0.61
2.23
2.42

0.26
1.97
2.19

7.54
8.54

5.88
6.88

296
54
126
286 $

303
57
130
240

225

230

SECTION 2- RETURNS AND VOLATILITY (add rows to show work, label answers)

Economic State Probability

Common Stock Long-term Bond
Boom
20%
18%
Good
35%
12%
Fair
25%
8%
Recession
20%
-8%

5%
6%
7%
8%

Common Stock Long-term Bond

8.2%

6.5%

Expected Return

Portfolio
Expected Return
9)

10)

7.6%

Portfolio Variance

0.3%

Portfolio Standard Deviation

5.6%

Shirin Khorrami
2014
0.21
1.80
2.05
6.09
7.09

296
62
124
212
233

CS Return
3.600%
4.200%
2.00%
-1.600%
LTB Return
1.00%
2.100%
1.7500%
1.600%
Portfolio Return
13.7100%
10.0200%
7.6700%
-2.7200%
7.6%

Common

LT Bond
67%

33%

Portfolio DifferenceDifference Squared

6.0875%
0.37%
2.3975%
0.06%
0.0475%
0.00%
-10.3425%
1.07%

Name:
SECTION 3- VALUATION (add rows to show work, label answers)
11)

Interest rate

12)

Market Risk Premium

9.0%

DE beta

1.32

13)

15)

16)

17)

2014

2.95%

Cost of Equity

14.9%

Market value of DE equity

Total capital (Lt debt + equity)

LT debt as % of capital
Equity as % capital

Effective tax rate

Weighted average cost of capital

22,502,480
33,390
79.6%
20.4%
28.6%

4.7%

Shirin Khorrami

interest rate 2012

interest rate 2013
interest rate 2014
MRR
RRF

Common Outstanding
Price Per Share

TD
TE
TD+TE
TD/(TD+TE)
Cost of Equity (RE)
1-corporate tax rate (
TE/(TD+TE)
Interest Rate

4.2%
3.8%
2.95%
12%
3%

401,830
$56

26,590
6,800
33,390
79.6%
14.9%
71.4%
20.4%
2.95%

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SECTION 4 - INVESTMENT ANALYSIS (add rows to show work, label answers)

19)

NPV
IRR
Decision to take on project? (y/n)

Y1
Depreciation
Savings
EBIT
Tax Rate
Net Income
OCF
Net Capital Spending
FCF

Y2
-2000
2500
500
-150
350
2350
0
2,350.00 $

Y0
Net Capital Spending

(1,750.16)
7.48%
No because the NPV is negative at -1750.16.
It is hard to make a decision based solely on the IRR
because it depends on the individual needs of the firm
and what IRR they typically have set across for projects

Y3
-2000
2500
500
-150
350
2350
0
2,350.00 $

Y1
-10,000

Y4
-2000
2500
500
-150
350
2350
0
2,350.00 $

Y2
2350

-2000
2500
500
-150
350
2350
0
2,350.00

Y3
2350

2350

Shirin Khorrami

Cost of New Equipment

$10,000
Annual energy savings
$2,500
Life of equipment
5 years
Salvage value (at end of 5 yrs)
10%
Depreciation straightline
5 years
Tax rate specific to this project
30%

firm
IRR should be compared with that of other projects.

Y5

Y0
-2000
2500
500
-150
350
2350
700
3,050.00 $

Y4

0
0
0
0
0
0
-10,000
(10,000.00)

Y5
2350

3050