Caso 3 Y 4

2488 Words Apr 23rd, 2015 10 Pages
CASE

f t r

3

it it :t
:r
le

Glen Mount Furniture Company
:0

:?
Iy

8, es ~e

on er e lnt la. ts) Ich

Furniture magnate Carl Thompson couldn 't believe the amount of pressure security analysts could put on a finn.
The Glen Mount Furniture Company was a leading manufacturer of fine home furnishings and distributed its product directly to department stores, independent home furnishing retailers, and a few regional furniture chains. The firm specialized in bedroom, dining room, and living room furniture and had three plants in North
Carolina and two in Virginia, Its home officewas in High Point, North Carolina.
In a recent presentation to the Atlanta chapter of the Financial
Analysts
Federation, Carl Thompson barely had taken a bite
…show more content…
.
.
.
.

$ 4,400,000
150,000
950,000
5,500,000

Long-terrn liabilities
Bonds payable, 10.625%

.
.

12,000,000

Stockholders ' equity
Common stock, $1 par value, 2,000,000 shares
Capital in excess of par
Retained earnings
Total stockholders ' equity
Totalliabilities and stockholders ' equity

.
.
.
.
.
.

2,000,000
8,000,000
13,000,000
23,000,000
40500000

Figure 3
GLEN MOUNT FURNITURE

COMPANY

Abbreviated Income Statement
For the Year Ended December 31, 2010
Sales
Less: Fixed Costs
Less: Variable Costs (58% of sales)
Operating income (EBIT)
Less: lnterest
Earnings before taxes (EBT)
Less: Taxes (34%)
Earnings after taxes (EAT)
Shares
Earnings per share

.
.
.
.

$45,000,000
12,900,000
26,100,000
$ 6,000,000
1,275,000
$ 4,725,000
1,606,500
$ 3,118,500
2,000,000
$
1.56

14

Required

Case 3

1. Project earnings per share for 2011 assuming that sales increase by $500,000. Use Figure 3 as the model for the calculation.
Further assume that the capital structure is not changed.
2. By what percent did eamings per share increase from 2010 to
2011 ?
3. Now assume that $10 million of debt replaces 625,000 shares of common stock as described in the case. The interest on the new debt will be 11.25 percent. What will projected eamings per share be for 2011 based on the anticipated sales increase of
$500,000?
4. Based on your answer to question 3, by what percent would eamings per share increase from 2010 to 2011 ?
5.

More about Caso 3 Y 4

Open Document