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    Hampton Machine Works Solutions

    Uploaded by

    Pham Giang
    - Hampton Machine Works provides financial statements for November 1978 and August 1979 as well as income statements for 12 months of 1978 and 4 months of 1979. - The balance sheet from November 1978 to August 1979 shows increases in cash, accounts receivable, and total assets, along with decreases in inventories and prepaid expenses. Liabilities also increased over this period. - The income statements show declining sales, costs, and profits from December 1978 to December 1979. EBIT declined from $1.5M to $1.88M over this period while net income fell from $783k to $914k.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd

    Hampton Machine Works Solutions

    Uploaded by

    Pham Giang
    28 views9 pages
    - Hampton Machine Works provides financial statements for November 1978 and August 1979 as well as income statements for 12 months of 1978 and 4 months of 1979. - The balance sheet from November 1978 to August 1979 shows increases in cash, accounts receivable, and total assets, along with decreases in inventories and prepaid expenses. Liabilities also increased over this period. - The income statements show declining sales, costs, and profits from December 1978 to December 1979. EBIT declined from $1.5M to $1.88M over this period while net income fell from $783k to $914k.

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    © Attribution Non-Commercial (BY-NC)

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    - Hampton Machine Works provides financial statements for November 1978 and August 1979 as well as income statements for 12 months of 1978 and 4 months of 1979. - The balance sheet from November 1978 to August 1979 shows increases in cash, accounts receivable, and total assets, along with decreases in inventories and prepaid expenses. Liabilities also increased over this period. - The income statements show declining sales, costs, and profits from December 1978 to December 1979. EBIT declined from $1.5M to $1.88M over this period while net income fell from $783k to $914k.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    28 views9 pages

    Hampton Machine Works Solutions

    Uploaded by

    Pham Giang
    - Hampton Machine Works provides financial statements for November 1978 and August 1979 as well as income statements for 12 months of 1978 and 4 months of 1979. - The balance sheet from November 1978 to August 1979 shows increases in cash, accounts receivable, and total assets, along with decreases in inventories and prepaid expenses. Liabilities also increased over this period. - The income statements show declining sales, costs, and profits from December 1978 to December 1979. EBIT declined from $1.5M to $1.88M over this period while net income fell from $783k to $914k.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    of 9

    Hampton Machine Works

    Cash
    Acct. Receivable
    Inventories
    Current Assets
    Gross Fixed Assets
    Acc. Depreciation
    Net Fixed Assets
    Prepaid Expenses

    CHG from nov. to Aug


    961
    561 Source
    (2,163) USE

    Nov-78
    2,520
    1,245
    2,601
    6,366
    4,010
    (2,998)
    1,012
    62

    92
    92 Source
    20 Source

    Total Assets
    Notes Payable, Banks
    Accounts Payable
    Accruals
    Taxes Payable
    Customer Advance Payments
    Current Liabilities
    Common Stock
    Surplus
    Total Equity

    7,440
    (1,000)
    (600)
    9
    (329)
    (726)

    Source
    Source
    Use
    Source
    Source

    348
    561
    150
    840
    1,899
    1,178
    4,363
    5,541

    750
    1,367 Use

    Total Liabilities and Equity

    7,440
    12/31/1978
    Dec-78
    Jan-79
    Feb-79
    Mar-79
    12 mos
    1 mos
    1 mos
    1 mos
    1 mos

    Net Sales
    COGS
    Gross Profit
    SG&A
    EBIT
    Interest Exp
    Net Income before taxes
    Taxes
    Net Income
    Dividends

    7,854
    5,052
    2,802
    1,296
    1,506
    1,506
    723

    1,551
    1,122
    429
    248
    181
    181
    87

    861
    474
    387
    103
    284
    15
    269
    129

    672
    369
    303
    61
    242
    15
    227
    109

    1,866
    1,362
    504
    205
    299
    15
    284
    136

    783

    94

    140

    118

    148

    50

    25

    First Step: Cash receipts and cash disbursements


    What are Revenues - cash

    Aug-79

    Sep-79

    Oct-79

    Nov-79

    Dec-79

    Shipments
    SALES

    CASH

    less: gen. aircraft


    New Monthly Sales billed
    pp A/R
    plus billings/new sales
    less collections
    Equals: Ending A/R

    684

    Aug-79

    2,163
    (840)
    1,323
    1,323

    1,505
    (726)
    779
    779

    1,604

    2,265

    1,604
    1,604

    2,265
    2,265

    684
    1,323

    1,323
    779

    779
    1,604

    1,604
    2,265

    Sep-79

    Oct-79

    Nov-79

    Dec-79

    Purchases
    PP Accts. Payable

    600
    948

    600
    600

    600
    600

    600
    600

    CASH payments on A/P


    Ending A/P balance

    948
    600

    600
    600

    600
    600

    600
    600

    948

    Dec-78
    491
    1,863
    28
    2,382
    4,010
    (3,010)
    1,000
    40

    Mar-79
    505
    1,971
    3,474
    5,950
    4,010
    (3,040)
    970
    39

    Jun-79
    1,152
    1,893
    3,276
    6,321
    4,010
    (3,070)
    940
    24

    Jul-79
    1,678
    1,269
    3,624
    6,571
    4,010
    (3,080)
    930
    24

    Aug-79
    1,559
    684
    4,764
    7,007
    4,010
    (3,090)
    920
    42

    3,422

    6,959

    7,285

    7,525

    7,969

    TA

    1,000
    371
    777
    74
    1,040

    1,000
    681
    849
    373
    1,040

    1,000
    399
    678
    354
    1,566

    1,000
    621
    585
    407
    1,566

    1,000
    948
    552
    479
    1,566

    N/P
    A/P
    Accruals
    Tax paybl
    Cust. Adv

    600
    552
    888
    -

    3,262
    428
    2,182
    2,610

    3,943
    428
    2,588
    3,016

    3,997
    428
    2,860
    3,288

    4,179
    428
    2,918
    3,346

    4,545
    428
    2,996
    3,424

    CL
    Com. Stk
    Surplus
    Tot. Eq

    2,040
    428
    3,754
    4,182

    5,872

    6,959

    7,285

    7,525

    7,969

    TL & E

    6,223

    Cash
    A/R
    Inv.
    CA
    Gross PPE
    Acc. Dep.
    Net PPE
    Ppd Exp.

    6,223

    Apr-79
    May-79
    Jun-79
    Jul-79
    Aug-79
    Aug-79
    1 mos
    1 mos
    1 mos
    1 mos
    1 mos
    8 mos
    1,566
    1,137
    429
    172
    257
    15
    242
    116

    873
    567
    306
    96
    210
    15
    195
    94

    1,620
    1,197
    423
    130
    293
    15
    278
    133

    723
    510
    213
    87
    126
    15
    111
    53

    507
    276
    231
    66
    165
    15
    150
    72

    126

    101

    145

    58

    78

    100

    12/31/1979
    (331)
    2,265
    3,024
    4,958
    4,360
    (3,137)
    1,223
    42

    12/31/1979
    4 Mos

    8,688 Net Sales


    5,892
    2,796
    920
    1,876 EBIT
    120
    1,756
    842
    914 Net Income

    908

    100

    150
    758

    *** NOT APPLES to APPLES


    COGS Calculation not included in SGA above
    Jan-80

    WIP inv. Used

    7,537
    4,187
    3,350
    1,600
    1,750
    70
    1,680
    771

    1,320

    Plus Raw Mat used


    Plus 4 mos Purchases

    420
    2400 4*600

    (1,566)
    Est. of Inv. Used/COGs

    2,265
    -

    Jan-80

    600

    4,140

    INTEREST EXPENSE
    Depr. Expense = old equip depr. + new
    Old is $10 per month
    New is $350,000 @ 8 yr SL deprecation
    43.8 annual depr.
    3.6 monthly
    7.3 two months depr.
    Total depr. For 4 months
    This should be added to COGS/or SGA

    47.3

    600
    Beginning Inv.
    Less: WIP used
    Less: RM used
    Ending Inventory

    4,764
    (1,320)
    (420)
    3,024

    What Can we Do to improve cash position?


    PLUG FIGURE
    Dec. shipments

    350k in capex
    8/79 plus 4 mos depr below

    defer proposed $100k dividend


    restructure loan request to pay one-half
    of balance in Dec. and rest in Jan. '1980
    Negotiate terms on capex

    Unchanged per chase


    Negotiate 60 day deferral of sales
    commissions to stockholder sales
    people like you did before
    Loan paid off
    Unchanged per case
    479-181-181+771
    paid off as prod. Shipped

    PY = NI - div

    Shipments 4 mos
    see below
    400*4

    pgs 64 parag. 2

    48% tax rate with $35k ITC

    CHG to Retained Earnings

    Stretch payables slightly or encourage


    customers to pay faster possibly with
    discount of less than 0.75% 10 days,
    net 30

    Sep-79

    Oct-79

    Dec-79

    Jan-80

    779

    1,604

    2,265

    1,673

    779

    1,604

    2,265

    600
    400
    350

    600
    400

    600
    400

    600
    400

    Receipts
    Collections of Accounts Receivable
    Bank Loan Proceeds

    684

    1,323
    350

    Total Cash Inflows/Sources

    684

    948
    400

    Nov-79

    Expenditures/uses
    Accounts Payable payments
    Other Operating Outlays
    Capital Expenditures
    Tax Payments
    Interest Payments
    original 1.0mm loan
    new 350k loan
    Principal Payments on Loans
    Dividends

    181

    181

    15
    -

    15
    -

    15
    5
    -

    15
    5
    1,350
    150

    Total Cash Outflow

    1,544

    1,365

    1,020

    2,701

    1,000

    NET CASH Inflow/(Outflow)


    Beginning Cash Balance

    (860)
    1,559

    (241)
    1,007

    (1,097)
    766

    1,265
    (331)

    Ending Cash Balance

    699

    308
    699
    1,007

    766

    (331)

    934

    Assumes 30 day collection pg 60

    Assumes 30 day Collection pg 60


    all exp. Other than interest & raw materials
    pg 59
    pg 64 paragraph 4

    Loan repayment at end of month


    pg 64 last paragraph

    Hampton Machine Works


    question 7

    $1,178,000
    10
    117,800
    $3,000,000
    $

    40.00
    63.7%

    $ 4,712,000

    $ 1,712,000

    Year end 1978 Common Stock ($10 Par Value)


    Divided by Par Value
    Equals
    Number of Shares before repurchase
    Purchase Price for 75,000 shares
    75000
    Value Per Share
    % Ownership of 75,000 shares
    Implied Value of the Equity (100%)
    for the Entire Company before purchase
    aka "Pre-Money" Value
    Another Way to Calculate is
    Based on Share Price
    Remaining Shares Outstanding
    42800 x share price
    Implied Value of the Equity
    "After" the transaction aka "Post Money"
    EBIT
    EBITDA

    1978
    1978

    1506
    1598

    ENTERPRISE VALUE = VALUE OF EQUITY + DEBT (NET)

    DEBT
    Value of
    Equity
    Enteprise
    Value

    ACTUAL
    Dec-78
    1,000

    1,712

    3,149

    2,712

    3,149

    Multiple
    of EBIT

    1.80 x

    Multiple of
    EBITDA

    1.70 x

    Implied Value
    Dec-79
    0

    1.8 x

    1.7x

    *** Valuation impacted due to all of the strange things


    going on at year end 1978 wrt customer advances and the
    1979 comparison with a balance sheet that has neg. cash

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