Canterbury Berhad (CTB) Has Assets Worth RM 10 Million Which is Financed

Answer for Canterbury Berhad (CTB) Has Assets Worth RM 10 Million Which is Financed for $1 Only (Instant Download)

Canterbury Berhad

Canterbury Berhad (CTB) has assets worth RM 10 million which is financed by 70% equity and 30% debt. The net income is RM4.5 million. CTB has set a 30% dividend payout to its shareholders. Net income and dividend are expected to remain constant or no growth (g=0%). CTB has 500,000 outstanding stocks. Current cost of equity is 14% while before tax cost of debt is 12%. CTB is considering to recapitalize by issuing a bond worth RM2 million at a cost of 13% before tax. CTB will use this bond’s proceed to repurchase some of its stocks from the market. CTB CTB’s corporate tax rate is 28%. CTB also forecasts that the cost of equity will rise to 17% should the proposed recapitazation is accepted. ( Note: NI=(EBIT-I)(1-T)) where NI is net income, EBIT is earnings before taxes and interest, I is interest and T is taxes.

Comparison of Oracle and Microsoft (Ratio Analysis)

Oracle logo at the Oracle headquarters.

For Parts 1 and 2:

Create an Excel spreadsheet to show your computations for the six ratios listed under each part.

For Part 3:

Create an Excel spreadsheet to show your computations for the six ratios listed under this part and also to include (copy and paste) the ratio calculations from the first two parts. In this part, you will calculate the last six ratios as well as comment on all of the ratios calculated so far, including the first twelve ratios calculated under the first two parts. Your comments for each ratio should include more than just a definition of the ratio. You should focus on interpreting each ratio number for each company and support your comments with the numbers found in the ratios.

The summary and conclusion should discuss the liquidity, solvency and profitability of each company.

Part 1

Prepare a four-column worksheet in Excel, with the left-most column (column 1) to write the ratio names, the second column from the left (column 2) to show the calculation of each ratio for Oracle Corporation, the second column from the right (column 3) to show the calculation of each ratio for Microsoft Corporation, and the right-most column (column 4) to include your DETAILED comments about each ratio and what the ratio tells you about each company under study. Calculate each of the following six ratios. Earnings per Share Current Ratio, Gross Profit Rate, Profit Margin Ratio, Inventory Turnover Ratio, and Days in Inventory (Average Age of Inventory).

Part 2

Prepare a four-column worksheet in Excel, column 1 to write the ratio names, column 2 to show the calculation of each ratio for Oracle Corporation, column 3 to show the calculation of each ratio for Microsoft Corporation, and column 4 to include your DETAILED comments about each ratio and what the ratio tells you about each company under study. Calculate each of the following six ratios. Receivable Turnover Ratio, Average Collection Period, Assets Turnover Ratio, Return on Assets, Ratio Debt to Total Assets Ratio, and Times Interest Earned Ratio

Part 3

Prepare a four-column worksheet in Excel, column 1 to write the ratio names, column 2 to show the calculation of each ratio for Oracle Corporation, column 3 to show the calculation of each ratio for Microsoft Corporation, and column 4 to include your DETAILED comments about each ratio and what the ratio tells you about each company under study. Remember to copy and paste the ratio calculations and interpretations from the first two parts of the project in this worksheet, in addition to calculating the following six ratios. Payout ratio, Return on Common Stockholders’ Equity Ratio, Free Cash Flow Current, Cash Debt Coverage ratio, Cash Debt Coverage ratio, and Price/Earnings Ratio [For the purpose of this ratio, use the market price per share on June 1, 2007 for each company].

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