... Parker University of the Potomac BUS 503 – Managerial Finance November 25, 2014 Professor Robert Shah Abstract Larissa Warren and Dan Ervin have been discussing the future of East Coast Yachts. The company has been experiencing fast growth, and the future looks like clear sailing. However, the fast growth means that the company’s growth can no longer be funded by internal sources, so Larissa and Dan have decided the time is right to take the company public. To this end, they have entered into discussions with the investment bank of Crowe & Mallard. The company has a working relationship with Robin Perry, the underwriter who assisted with the company’s previous bond offering. Crowe & Mallard have helped numerous small companies in the IPO process, so Larissa and Dan feel confident with this choice. Robin begins by telling Larissa and Dan about the process. Although Crowe & Mallard charged an underwriter fee of 4 percent on the bond offering, the underwriter fee is 7 percent on all initial stock offerings of the size of East Coast Yachts’ initial offering (Ross etal, 2013). Introduction Although Crowe & Mallard charged an underwriter fee of 4 percent on the bond offering, the underwriter fee is 7 percent on all initial stock offerings of the size of East Coast Yachts’ initial offering. Robin tells Larissa and Dan that the company can expect to pay about $1,800,000 in legal fees and expenses, $15,000 in SEC registration fees, and $20,000 in other filing...
Words: 1194 - Pages: 5
...East Coast Yachts 1) Current Ratio=17,582,000/23,689,300=.74 times Quick Ratio= (17,582,000-7,363,700)/23,689,300=.43 times Total Asset Turnover= 234,300,000/130,338,900= 1.79 times Inventory Turnover= 165,074,000/7,363,700=22.4 times Receivables Turnover=234,300,000/6,567,600=35.7 times Total Debt Ratio= (130,338,900-66,169,600)/130,338,900= .49 times Debt-Equity Ratio= (23,689,300 + 40,480,000)/66,169,600=.97 times Equity Multiplier=130,338,900/66,169,600=1.97 times Interest Coverage= 33,591,000/4,212,600=7.97 times Profit Margin= 17,627,040/234,300,000=7.5% Return on Assets=17,627,040/130,338,900=13.5% Return on Equity=17,627,040/66,169,600=26.6% 2) Current Ratio=.74 times The current ratio for East Coast Yachts would be viewed as negative considering its below the industry median of 1.43 but above the lower quartile of .50. This ratio illustrates that the company has less current assets and overall liquidity to pay its current liabilities compared to the industrial average. Quick Ratio= .43 times The quick ratio for East Coast Yachts is above the industry median of 0.38 but less than the upper quartile resulting in a positive ratio for the company. This shows that the company has an efficient way of managing inventory in respect to liabilities. Therefore this ratio proves that the company is above average in relative liquidity when compared within their industry. Total Asset Turnover= 1.79 times The total asset turnover ratio for East Coast Yachts...
Words: 781 - Pages: 4
...Jeff A. Lehart Ashford University BUS 650 Managerial Finance Professor Shaw September 3, 2012 1). The question is what implications do you draw from the graph for mutual fund investors? I would hope that the funds outperform the market so I would be richly rewarded. The truth of the matter is that less than 50% of equity mutual funds outperform the market. When looking at this graph it is a fact that less than half will outperform the market. This means that most funds will be underperforming tht market given the average. You have to consider that average return has to be for all the investors’ returns not just those who outperform the market. That means I would expect more than 50% of mutual funds to underperform due to expenses that are associated with mutual funds. Looking at the large-cap stock fund you will see that it has an expense ratio of 1.5% just to start. This means you have to exceed the market by that amount so you can cover those fees. Regardless if the market is efficient or not, mutual funds managers are supposed to be the best investors in the market and will either get richly rewarded or fired. It is possible that you can outperform the market but have to be prepared to get some economic returns from the stock market. Unfortunately the graph shows that most can’t. Most mutual funds tend to hit the market average before expenses so outperforming the market may not be a reality. 2. Is the graph consistent or inconsistent with market efficiency...
Words: 487 - Pages: 2
...EAST COAST YACHTS INDUSTRIES 1. East Coast Yachts Financial Ratios | Current Ratio | 0.75 times | Quick Ratio | 0.43 times | Total Assets Turnover | 1.54 times | Inventory Turnover | 19.22 times | Receivables Turnover | 30.77 times | Debt Ratio | 0.49 times | Debt-Equity Ratio | 0.96 times | Equity Multiplier | 1.96 times | Interest Coverage | 7.96 % | Profit Margin | 7.51 % | Return on Assets | 11.57% | Return on Equity | 22.7% | 2. Performance of ECY to the industry as a whole. Financial Ratios | Value | Yachts Industry Ratios | | | Lower Quartile | Median | Upper Quartile | Current Ratio | 0.75 | 0.50 | 1.43 | 1.89 | Quick Ratio | 0.43 | 0.21 | 0.38 | 0.62 | Total Assets Turnover | 1.54 | 0.68 | 0.85 | 1.38 | Inventory Turnover | 19.22 | 4.89 | 6.15 | 10.89 | Receivables Turnover | 30.77 | 6.27 | 9.82 | 14.11 | Debt Ratio | 0.49 | 0.44 | 0.52 | 0.61 | Debt-Equity Ratio | 0.96 | 0.79 | 1.08 | 1.56 | Equity Multiplier | 1.96 | 1.79 | 2.08 | 2.56 | Interest Coverage | 7.96 | 5.18 | 8.06 | 9.83 | Profit Margin | 7.51 % | 4.05% | 6.98% | 9.87% | Return on Assets | 11.57% | 6.05% | 10.53% | 13.21% | Return on Equity | 22.7% | 9.93% | 16.54% | 26.15% | a. Current Ratio: Current Ratio of 0.75 times means that East Cost Yachts (ECY) has its current liabilities covered by 0.75 times or it has $0.75 in current assets for every $1 in current liabilities. This situation is not good for East Cost Yachts because current...
Words: 2126 - Pages: 9
...1. The largest difference in the costs is the definitely the reduced possibility of under pricing in a Dutch auction. I cannot determine which one is better than the other. In theory, the Dutch auction should be better since it should eliminate under pricing. According to Google shows, under pricing can still exist in a Dutch auction. Whether the under pricing is a severe in a Dutch auction as it would be in a traditional underwritten offer is unknown. 2. There is no type of formula I can determine who is more correct. Dan and Larissa will have to see where things stand a few years down the road and base it off of performance. The biggest disadvantage of raising the extra cash in the IPO includes the agency costs of excess cash. The extra cash may encourage management to act carelessly. The extra cash will also earn a small return unless invested in income producing assets. At best, cash and short-term investments are a zero NPV investment. The advantages of the increased IPO size include the increased liquidity for the company, and the lower probability that the company will have to go back to the primary market in the near term future. The increased size will also reduce the costs of the IPO on a percentage of funds raised, although this may not be a large advantage. 3. The underwriter fee should be around 7 percent of the amount raised: Underwriter fee = $70,000,000(.07) Underwriter fee = $4,900,000 The company should currently provide audited financial...
Words: 574 - Pages: 3
...Your 401 (k) Account At East Coast Yachts You have been at your job for East Coat Yachts for a week now and have decided you need to sign up for the company’s 401(k) plan. Even after your decision with Sarah Brown, the Bledsoe Financial Services Representative, you are still unsure as to which investment option you should choose. Recall that the options available to you are stock in East Coast Yachts, the Bledsoe S&P 500 index fund, the Bledsoe Small-cap fund, the Bledsoe Large-Company Stock Fund, the Bledsoe Bond Fund, and the Bledsoe Money Market Fund. You have decided that you should invest in a diversified portfolio, with 70 percent of your investment in equity, 25 percent in bonds, and 5 percent in the money market. You have decided to focus your equity investment on large-cap stocks, but you are debating whether to select the S&P 500 Index fund or the Large-Company Stock Fund. In thinking it over, you understand the basic difference in the two funds. One is a purely passive fund that replicates a widely followed large-cap index, the S&P 500, and has low fees. The other is actively managed with the intention that the skill of the portfolio manager will result in improved performance relative to an index. Fees are higher in the latter fund. You’re just not certain on which way to go, so you ask Dan Ervin, who works in the company’s finance area, for advice. After discussing your concerns, Dan gives you some information comparing the performance of equity...
Words: 422 - Pages: 2
...Your 401(k) Account At East Coast Yachts 1. The implications that can be drawn from the given graph are: a. The actively managed funds have consistently outperformed the low fee index funds over the past decade of January 1977 through December 1986. b. Although the economic conditions over the decade in review is not mentioned in the case study, based on the fluctuations in the up and down cycles in the funds return suggest that it is following the economic cycle of the given time period. This trend is also apparent in the S&P 500 over the same time periods which offered a return of 1.09% over the decade. (Yahoo Finance, 2012). 2. The graph is not consistent with market efficiency. The efficient market hypothesis states that an investor cannot consistently outperform the market over a long period of time. To consider the market efficient all respected information should be made public and reflected in the current price of the asset (Ross, Westerfield, and Jaffe, 2010). According to the Case Study graph, the actively of the managed funds have consistently outperformed the broader market including the S&P 500 over the given time period. According to Ross, Westerfield and Jaffe (2010), Public skepticism of market efficiency is due to fluctuations in the day to day stock prices. These fluctuations however are not inconsistent with efficiency. Stocks in an efficient market will adjust to new market and economic data by changes in the stock...
Words: 375 - Pages: 2
...401(k) Account at East Coast Yachts Elijah Clark Walden University 401(k) Account at East Coast Yachts A new company employee is seeking to sign up for the company’s 401(k) plan. The individual is trying to determine which investment option is the best. After gaining information from a colleague, the employee decides to invest in a diversified portfolio. However, the employee is confused on whether to select the Vanguard 500 index fund or equity mutual funds. Assignment Questions The 401(k) Account at East Coast Yachts mini case asks to provide details regarding implications drawn from a provided graph for mutual fund investors. Additionally, the mini case asks whether the graph is consistent with market efficiency. Furthermore, the mini case seeks to understand the reason for making an investment decision for the equity portion of a 401(k) account. Graph for Mutual Fund Investors The general desire for an investor is to receive a return on their investments. The mutual fund has to outperform the market return in order to produce profits. However, mutual funds are unlikely to outperform the market because they usually have average market returns before expenses (Ross, Westerfield, & Jaffe, 2013). Considering the fund managers are responsible for making decisions and achieving results, they often take a high fee, which adds to expenses and deducts from the funds overall value. Additionally, no more than half of equity mutual fund investors are likely to outperform...
Words: 613 - Pages: 3
...white lines. As we started walking to our right, the hustle and bustle of a Bicycle Rental Shop could be heard. Smells of the aroma of mouth watering food could be smelt from a distance. When we entered the shop we were greeted by sales assistants standing by the door. One of the sales assisstants took us to the mountain bike section. As I entered the section, I was amazed by the sight. From head to toe were colourful bikes lining agaiinst the walls. Small bikes, medium bikes and large bikes were piled against the wall. I chosed a ruby red bike and my Uncle chose a blue bike. As we had a day rental, we decided to cycle to Changi Beach and East Point. I hopped on my bike and started to cycle. along the way we passed many shops selling food, drinks, children playing in the sea or building sandcastles. The bicycle trail winded further East. There was a part where the bicycle trail winded near a pach of the beach and we could see the clear blue water rising on the beach and lowering back down into the sea. as it rised, we could see a tiny bit of the beautiful, peaceful, loving underwater world. The water smelt fresh but it also smelt a bit salty. Moving...
Words: 724 - Pages: 3
...HIMALAYA - Case Questions 1. In view of increasing interest among local consumers with regards to herbal products, what immediate steps should Embun Elit Take. Embun is well establishing in the current market with 200 ranges of products, they should go for market penetration strategy. This strategy involves attempts to increase the present buyers’ usage or consumption rates of the offering. The mix of marketing activities will enable them to capture bigger market or the volume of sales. The strategy inclusive of reduction in the product pricing by bigger promotion and by product in introducing new product or less favoured products. Heavier promotion in emphasizing the importance of herbal product in daily usage will enable them to capture wider markets especially the younger markets between 18 – 24 years old. These demographic are big and always on trend / or to be called the trend followers, with bigger promotional activities these market segment can be concurred and will be a long term customers due to the product knowledge that they had. In term of product Himalaya have about 200 product range that been offered and in Malaysia about 100 only due to the strict requirement of local authorities in safe guarding the local players and pharmaceutical restriction. Here Himalaya can work with local players to be part of Himalaya and produce the product with Malaysia resources. R&D plays a major role in getting a scientific write out for the certification and approval...
Words: 1373 - Pages: 6
...The founder of the Florida East Coast Railway, Henry Flagler was born on January 2, 1830 in Hopewell, New York. At the age of 14, Henry left school during his 8th grade year to work in Ohio for the Harkness Family, who were the family of Henry’s mother’s second husband. On November 9, 1853, Flagler married Mary Harkness with whom he had three children. After working in the salt and grain industry for many years, Flagler partnered with John D. Rockefeller to form a partnership that later became Standard Oil Corporation, an oil refinery business that expanded to many states. May 18, 1881, Henry’s wife Mary died in New York and two years later he married one of his deceased wife’s nurses, Alice Shourds. Since Henry was busy with the refinery business the couple were not able to honeymoon until the winter time, at which time they visited St. Augustine, Florida. Henry Flagler found the city charming but the hotel facilities and transportation systems not right. Flagler began construction of the 540 room Ponce De Leon hotel by himself, but spent several times his original estimate of $200,000. In order to create a transportation system for his hotel, Flagler purchased short line railroads in what later became known as the Florida East Coast Railway. The Ponce de Leon hotel opened on January 10, 1888 and was an instant success. He also built a railroad bridge across the Saint Johns River to gain access to the southern half of the state and purchased the hotel Ormond just north...
Words: 335 - Pages: 2
...content My main page will consist of many links that lead in to different regions. First I have an “About Us” page which will have information of my staff and I. Second I will have “Contact us” page that will list email addresses of those writing and editing. Third, there will be four pages which cover markets including west coast, east coast, mid-west, and south regions. Each will have links to their individual teams in which the user will be able to read, blog, and watch highlights. • File names Main Page = index.html About Us = about.html Contact Us = contact.html East Coast Region = ecr.html East Coast Region Teams = ecrteams1.html East Coast Region blog = ecrblog2.html East Coast Region vid/high = ecrflash.html Mid-West Region = mwr.html Mid-West Region Teams = mwrteams1.html Mid-West Region blog = mwrblog2.html Mid-West Region vid/high = mwrflash.html South Region = southr.html South Region Teams = southrteams1.html South Region blog = southrblog2.html South Region vid/high = southrflash.html West Coast Region = wcr.html West Coast Region Teams = wcrteams1.html West Coast Region blog = wcrblog2.html West Coast Region vid/high = wcrflash.html • Relationships between page From the main page, the user will be allowed to roam through various pages and links through the main page. Once the user decides where he she wants to go there will be links set on each page that allows the user to go back and forth through each page without...
Words: 426 - Pages: 2
...[pic] ▪ Henry Morrison Flagler was born on January 2, 1830 in Hopewell, New York. He was an American businessman, real estate promoter, and railroad developer. ▪ He was a key figure in the development of the eastern coast of Florida along the Atlantic Ocean and was founder of what became the Florida East Coast Railway. He is known as the father of Miami, Florida and also founded Palm Beach, Florida. ▪ In 1912, a proud Henry Flagler rode the first train into Key West, marking the completion of the Florida East Coast (FEC) Railway's overseas railroad connection to Key West and the linkage by railway of the entire east coast of Florida. ▪ The FEC was the product of Flagler's resources and imagination. Flagler's construction of hotels at points along the railroad and his development of the agricultural industry through the Model Land Company established tourism and agriculture as Florida's major industries. Amazingly, Flagler accomplished these feats after retiring from his first career. Flagler had already founded the vast empire of Standard Oil with partners John D. Rockefeller and Samuel Andrews, before becoming interested in Florida. ▪ When Flagler first visited Florida in 1878, he recognized the state's potential for growth but noticed a lack of hotel facilities. Flagler returned to Florida and in 1885 began building a grand St. Augustine hotel, the Hotel Ponce de Leon. Flagler realized that the key to developing Florida was a solid transportation...
Words: 375 - Pages: 2
...1-Compute all industry ratios presented for East Coast Yachts and COMPARE and comment on each ratio as compared to the Industry Median. (60pts) Industry ratios presented for East Coast Yachts Current ratio = $11,270,000 / $15,030,000 Current ratio = 0.75 times Quick ratio = ($11,270,000 – 4,720,000) / $15,030,000 Quick ratio = 0.44 times Total asset turnover = $128,700,000 / $83,550,000 Total asset turnover = 1.54 times Inventory turnover = $90,700,000 / $4,720,000 Inventory turnover = 19.22 times Receivables turnover = $128,700,000 / $4,210,000 Receivables turnover = 30.57 times Total debt ratio = ($83,550,000 – 42,570,000) / $83,550,000 Total debt ratio = 0.49 times Debt-equity ratio = ($15,030,000 + 25,950,000) / $42,570,000 Debt-equity ratio = 0.96 times Equity multiplier = $83,550,000 / $42,570,000 Equity multiplier = 1.96 times Interest coverage = $18,420,000 / $2,315,000 Interest coverage = 7.96 times Profit margin = $9,663,000 / $128,700,000 Profit margin = 7.51% Return on assets = $9,663,000 / $83,550,000 Return on assets = 11.57% Return on equity = $9,663,000 / $42,570,000 Return on equity = 22.70% Liquidity or Short-Term Solvency Ratios Calculate and compare to industry ratios: | East Coast Yachts | Lower Quartile | Median | Upper Quartile | Positive, Negative, or Neutral Relative to Industry | Current Ratio | 0.75 | 0.50 | 1.43 | 1.89 | NegativeIt is not positive as it is lower than median. It shows that...
Words: 1482 - Pages: 6
...EAST COAST YACHTS 1. The calculations for the ratios listed are: Current ratio = $11,270,000 / $15,030,000 Current ratio = 0.75 times Quick ratio = ($11,270,000 – 4,720,000) / $15,030,000 Quick ratio = 0.44 times Total asset turnover = $128,700,000 / $83,550,000 Total asset turnover = 1.54 times Inventory turnover = $90,070,000 / $4,720,000 Inventory turnover = 19.22 times Receivables turnover = $128,700,000 / $4,210,000 Receivables turnover = 30.57 times Total debt ratio = ($83,550,000 – 42,570,000) / $83,550,000 Total debt ratio = 0.49 times Debt-equity ratio = ($15,030,000 + 25,950,000) / $42,570,000 Debt-equity ratio = 0.96 times Equity multiplier = $83,550,000 / $42,570,000 Equity multiplier = 1.96 times Interest coverage = $18,420,000 / $2,315,000 Interest coverage = 7.96 times Profit margin = $9,663,000 / $128,700,000 Profit margin = 7.51% Return on assets = $9,663,000 / $83,550,000 Return on assets = 11.57% Return on equity = $9,663,000 / $42,570,000 Return on equity = 22.70% 2. Regarding the liquidity ratios, East Coast Yachts current ratio is below the median industry ratio. This implies the company has less liquidity than the industry in general. However, the current ratio is above the lower quartile, so there are companies in the industry with lower liquidity than East Coast Yachts. The company...
Words: 706 - Pages: 3
