Week 1 Problem SetAnswer the following questions and solve the following problems in the space provided. When you are done, save the file in the format flastname_Week_1_Problem_Set.docx, where flastname is your first initial and you last name, and submit it to the appropriate dropbox.Chapter 1 (page 19)1.What is the most important difference between a corporation andallother organizational forms?

2.What does the phraselimited liabilitymean in a corporate context?

3.Which organizational forms give their owners limited liability?

4.What are the main advantages and disadvantages of organizing a firm as a corporation?

5.Explain the difference between an S corporation and a C corporation.

Chapter 2The following is provided for use in answering the next set of questions. You may also find table 2.5 on page 53 of your text and all questions on pages 5657.TABLE 2.520092013 Financial Statement Data and Stock Price Data for Mydeco Corp.Mydeco Corp. 20092013(All data as of fiscal year end; in $ million)

Income Statement20092010201120122013

RevenueCost of Goods Sold404.3(188.3)363.8(173.8)424.6(206.2)510.7(246.8)604.1(293.4)

Gross ProfitSales and MarketingAdministrationDepreciation and Amortization216.0(66.7)(60.6)(27.3)190.0(66.4)(59.1)(27.0)218.4(82.8)(59.4)(34.3)263.9(102.1)(66.4)(38.4)310.7(120.8)(78.5)(38.6)

EBITInterest Income (Expense)61.4(33.7)37.5(32.9)41.9(32.2)57.0(37.4)72.8(39.4)

Pretax IncomeIncome Tax27.7(9.7)4.6(1.6)9.7(3.4)19.6(6.9)33.4(11.7)

Net IncomeShares outstanding (millions)Earnings per share18.055.0$0.333.055.0$0.056.355.0$0.1112.755.0$0.2321.755.0$0.39

Balance Sheet20092010201120122013

AssetsCashAccounts ReceivableInventory48.888.633.768.969.830.986.369.828.477.576.931.785.086.135.3

Total Current AssetsNet Property, Plant, and Equip.Goodwill and Intangibles171.1245.3361.7169.6169.6243.3184.5309361.7186.1345.6361.7206.4347.0361.7

Total AssetsLiabilities and Stockholders EquityAccounts PayableAccrued Compensation778.118.76.7774.617.96.4855.222.07.0893.426.88.1915.131.79.7

Total Current LiabilitiesLong-term Debt25.4500.024.3500.029.0575.034.9600.041.4600.0

Total LiabilitiesStockholders Equity525.4252.7524.3250.3604.0251.2634.9258.5641.4273.7

Total Liabilities and Stockholders Equity778.1774.6855.2893.4915.1

Statement of Cash Flows20092010201120122013

Net IncomeDepreciation and AmortizationChg. in Accounts ReceivableChg. in InventoryChg. in Payables and Accrued Comp.18.027.33.9(2.9)2.23.027.018.82.8(1.1)6.334.3(0.0)2.54.712.738.4(7.1)(3.3)5.921.738.6(9.2)(3.6)6.5

Cash from OperationsCapital Expenditures48.5(25.0)50.5(25.0)47.8(100.0)46.6(75.0)54.0(40.0)

Cash from Investing ActivitiesDividends PaidSale (or purchase) of stockDebt Issuance (Pay Down)(25.0)(5.4)(25.0)(5.4)(100.0)(5.4)75.0(75.0)(5.4)25.0(40.0)(6.5)

Cash from Financing Activities(5.4)(5.4)69.619.6(6.5)

Change in Cash18.120.117.4(8.8)7.5

Mydeco Stock Price$7.92$3.30$5.25$8.71$10.89

29.In fiscal year 2011, Starbucks Corporation (SBUX) had revenue of $11.70 billion, gross profit of $6.75 billion, and net income of $1.25 billion. Peets Coffee and Tea (PEET) had revenue of $372 million, gross profit of $72.7 million, and net income of $17.8 million. a.Compare the gross margins for Starbucks and Peets. b.Compare the net profit margins for Starbucks and Peets. c.Which firm was more profitable in 2011?

31.SeeTable 2.5showing financial statement data and stock price data for Mydeco Corp. a.How did Mydecos accounts receivable days change over this period? b.How did Mydecos inventory days change over this period? c.Based on your analysis, has Mydeco improved its management of its working capital during this time period?

32.SeeTable 2.5showing financial statement data and stock price data for Mydeco Corp. a.Compare Mydecos accounts payable days in 2009 and 2013. b.Did this change in accounts payable days improve or worsen Mydecos cash position in 2013?

33.SeeTable 2.5showing financial statement data and stock price data for Mydeco Corp.

a.By how much did Mydeco increase its debt from 2009 to 2013? b.What was Mydecos EBITDA/Interest coverage ratio in 2009 and 2013? Did its coverage ratio ever fall below 2? c.Overall, did Mydecos ability to meet its interest payments improve or decline over this period?

42.For fiscal year 2011, Starbucks Corporation (SBUX) had total revenues of $11.70 billion, net income of $1.25 billion, total assets of $7.36 billion, and total shareholders equity of $4.38 billion. a.Calculate the Starbucks ROE directly, and using the DuPont Identity. b.Comparing with the data for Peets in Problem 41, use the DuPont Identity to understand the difference between the two firms ROEs.

Berk, J., & DeMarzo, P. (2014). Corporate Finance. Boston, MA: Pearson.