ACT 670Final ExamTake Home PartName: _____________________Instructions:1. You may use your book and notes for this exam take home part, but you may not discuss the questions or related ideas with any other person while you are taking the exam.2. If you have to make any assumption(s) to answer any of the problems, please state your assumption(s) clearly, and explain why you needed to make the assumption(s).3. Sign the honor code pledge after completing the examination.4. Show all workings for full credit. Good LuckHonor Code Pledge:I have neither given nor received any unauthorized assistance on this examination. Problem 1: (10 points)The following balance sheet and income statement pertains to Goode Corp., using the following assumptions complete1a forecasted 2016 income statement: Assumptions for 2016:Revenue growth rateCOGSOperating expenses interest expense tax rate32%64% of sales23% of sales10% of beginning long-term debt35%Goode Corp. Consolidated Statement of Income(Thousands except per share amounts)2015Net Revenues$345,871(226,546)(83,009)Cost of RevenueSG&AOperating Income36,316 Interest Expense (484)Income Before Income TaxesIncome taxesNet Income35,832(12,541)$23,291Goode Corp Consolidated Balance Sheet(Thousands)Current AssetsCash and Equivalents20157,9056,3086,61439,45860,285Merchandise inventoryAccounts receivablePPE (including intangibles), netTotal AssetsLiabilities and Stockholders’ EquityAccounts payableLong-term debtShareholders’ EquityCommon stock and APICRetained earnings total Liabilities and Shareholders’

Eq.9,64313,50028,6138,52960,285Forecasted income statement:Goode Corp. Consolidated Statements of Income(Thousands except per share amounts)201620152Problem 2: (10 points)The following information about Douglas Corp.s Accounts Receivable and Sales are presented below:Year 2015-Beginning Balance of A/R = $791MYear 2015 -Ending Balance of A/R = $807MYear 2015 – Sales = $3,002MAssumptions:Sales growth will be equal to 6% per yearA/R turnover will stay constant throughout the forecast periodRequired:a.Using this information, forecast Douglas Corp.s the growth in Accounts Receivable for years 20162020.(please attach excel file)b.What problem does a constant A/R turnover assumption cause?c.Provide a solution to the problem caused by a constant A/R turnover assumption.Problem 3: (15 points)General Mills (NYSE: GIS) is a large manufacturer and distributor of package consumer food products.Benoit Gagnon, a buy-side analyst covering General Mills, has studied the historical growth rates insales, earnings, and dividends for GIS, and also has made projections of future growth rates. Gagnonexpects the current dividend of 1.10 per share to grow at 6 percent for the next five years, and that thegrowth rate will decline to 3 percent and remain at that level thereafter.The risk-free rate is 4%, the market risk premium is 6%, and GISs beta, assumed to be 0.50.Required:1. Calculate the required rate of return on equity for General Mills as of the beginning of Year +1.32. Calculate the sum of the present value of total dividends for Years +1 through +5.3. Calculate the continuing value of General Mills at the start of Year +6 using the constant growthmodel with Year +6 total dividends.4. Calculate the present value of continuing value as of the beginning of Year +1.5. Compute the value per share of General Mills as of the beginning of Year +1. Remember toadjust the present value for midyear discounting.4