[SOLVED] This Mini Case is available in My

This Mini Case is available in My Finance Lab. After graduating from college in December 2014, Elizabeth Arce started her career at the W&T Corporation, a small- to medium-sized warehouse distributor in Nashville, Tennessee. The company was founded by David Winston and Colin Tabor in 2000, after they had worked together in management at Wal-Mart. Although Arce had an offer from Samâ€™s Club, she became excited about the opportunity with W&T. Winston and Tabor, as CEO and VP-marketing, respectively, assured her that she would be given every opportunity to take a leadership role in the business as quickly as she was prepared for the role. In addition to receiving a competitive salary, Arce will immediately be entitled to a bonus based on how well the company does financially. The bonus is determined by the amount of Economic Value Added (EVA) that is generated in a year. To begin, she will receive 1 percent of the firmâ€™s EVA each year, to be paid half in stock and half in cash. In any year that the EVA is negative, she will not receive a bonus. Also, the firmâ€™s stock is traded publicly on the NYSE MKT, a stock exchange for small-cap companies. The year of 2014 turned out to be a good year financially for the business. But in the ensuing year, 2015, the company experienced a 5.3 percent sales reduction, where sales declined from $5.7 million to $5.4 million. The downturn then led to other financial problems, including a 50 percent reduction in the companyâ€™s stock price. The share price went from $36 per share at the end of 2014 to $18 per share at the conclusion of 2015! Financial information for W&T for both years is shown on the next page, where all the numbers, except for per share data, are shown in $ thousands. a. Using what you have learned in this chapter and Chapter 3, prepare a financial analysis of W&T, comparing the firmâ€™s financial performance between the 2Â years. In addition to the financial information provided on the next page, the companyâ€™s chief financial officer, Mike Stegemoller, has estimated the companyâ€™s average cost of capital for all its financing to be 10.5 percent. b. What conclusions can you make from your analysis? c. How much will Arceâ€™s bonus be in 2014 and 2015, in the form of both cash and stock? How many shares of the stock will Arce receive? d. What recommendations would you make to management?

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W&T Corporation Income Statement (in thousands) 2014 2015 Sales $ 5,700 $ 5,400 Cost of goods sold (3,700) (3,600) Gross profits $ 2,000 $ 1,800 Operating expenses Selling and G&A expenses $ (820) $ (780) Depreciation expense (340) (500) $ (1,160) $ 840 Total operating expenses $ (1,280) Operating profits $ 520 Interest expense (200) (275) Earnings before taxes (taxable income) $ 640 $ 245 Income taxes (230) (65) Net income $ 410 $ 180 Additional information: Number of common shares outstanding 150 150 Dividends paid to stockholders $ 120 $ 120 Market price per share $ 36 18 W&T Corporation Balance Sheet 2014 2015 Assets Cash Accounts receivable Inventories Other current assets Total current assets $ 300 $ 495 700 915 600 780 125 160 $1,725 $2,350 Gross fixed assets $4,650 $4,950 Accumulated depreciation (1,700) (2,200) Net fixed assets $2.950 $2.750 Total assets $4,675 $5,100 Liabilities (Debt) and Equity Accounts payable $ 400 $ 640 Short-term notes payable 250 300 $ 940 Total current liabilities Long-term debt Total liabilities $ 650 1,250 $1,900 1,325 $2,265 Common equity Common stock $1,100 $1,100 Retained earnings 1,675 $2,775 1,735 Total common equity $2,835 Total liabilities and equity $4.675 $5,100

Question: This Mini Case is available in My

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