BA 350 Week 1


  • Chapter 1 Question 1.1, 1.3, 1.5, 1.8

Chapter 2.  Ch 02 P14 Build a Model

Except for charts and answers that must be written, only Excel formulas that use cell references or functions will be accepted for credit. Numeric answers in cells will not be accepted.

‘a. Cumberland Industries’ most recent sales were $455,000,000; operating costs (excluding depreciation) were equal to 85% of sales; net fixed assets were $67,000,000; depreciation amounted to 10% of net fixed assets; interest expenses were $8,550,000; the state-plus-federal corporate tax rate was 40% and Cumberland paid 25% of its net income out in dividends.  Given this information, construct Cumberland’s income statement. Also calculate total dividends and the addition to retained earnings.

‘b. Cumberland Industries’ partial balance sheets are shown below. Cumberland issued $10,000,000 of new common stock in the most recent year. Using this information and the results from part a, fill in the missing values for common stock, retained earnings, total common equity, and total liabilities and equity.


‘c.  Construct the statement of cash flows for the most recent year.

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BA 350 Week 1,

Proprietorship – A business owned by one individual.
Partnership – A partnership exists when two or more persons associate to conduct a business.
Corporation – A corporation is a legal entity created by a state. The corporation is separate and distinct from its owners and managers.
Limited Partnership – A partnership in which limited partners’ liabilities, investment returns, and control are limited; general partners have unlimited liability and control
Limited Liability Partnership (LLP) – Sometimes called a limited liability company (LLC) combines the limited liability advantage of a corporation with the tax advantages of a partnership.
Professional Corporation – Has most of the benefits of incorporation but the participants are not relieved of professsional (malpractice liability. ………………………


Chapter 1 Question 1.3


A firm’s intrinsic value is an estimate of a stock’s “true” value based on accurate risk and return data. It can be estimated but not measured precisely.  The intrinsic value is dictated by the market forces. Fundamental


Chapter 1 Question 1.5


Direct transfers of money and securities occur when a business sells its stocks or bonds directly to savers, without going through any type of financial institution. The business delivers its securities to savers, who in turn give the firm the money it needs.
2. Transfers may also go through an investment banking house which underwrites the issue. An underwriter



Key Input Data for Cumberland Industries  (Thousands of dollars)

Sales Revenue $455,000
Expenses (excluding depreciation) as a percent of sales 85.0%
Net fixed assest $67,000
Depr. as a % of net fixed assets 10.0%






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