Directions: Answer the 3 questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both.

Assume that you recently graduated and have just reported to work as an investment adviser at the one of the firms on Wall Street. You have been presented and asked to review the following Income Statement and Balance Sheets of one of the firm’s clients. Your boss has developed the following set of questions you must answer.

1.Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? What is the free cash flow for 2014?

2.Calculate the 2014 current and quick ratios based on the projected balance sheet and income
statement data. What can you say about the company’s liquidity position in 2013?

3.Use the extended DuPont equation to provide a summary and overview of company’s financial
condition as projected for 2014. What are the firm’s major strengths and weaknesses?

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