Instructions: Using the company and market information provided below, complete the following two tabs in this

MS Excel Workbook: Computation of the estimated current fair value of the note issued by the company in 20X3 Computation of the estimated current fair value of the company's "portfolio" of debt (notes and bonds) outstanding, as reported in its fiscal year end (FYE) 20X4 balance sheet The background papers, Present Value Concepts and Bond Valuation, and Financial Statement Concepts and Financial Reporting provide useful guidance for completing this assignment. Based on the results of your computed estimate of the fair value of the company's debt "portfolio" (the second tab following this one) and the additional information provided below, indicate (i) the apparent total fair value ($US) of assets unrecognized or under-valued in the FYE 20X4 balance sheet and (ii) the possible kinds or categories of assets that could be unrecognized or under-valued and the apparent reasons for this. Limit the length of your response to 150 words.

Replace the text in this cell with your response.

Advanced Technology and Services Company Consolidated Balance Sheet December 31, 20X4 $US in millions
Assets: Cash and cash equivalents Investments securities, at cost (to be held to maturity) Accounts receivable, net Inventory, at lower of LIFO cost or market value Total current assets Property, plant, and equipment, at cost Less accumulated depreciation Property, plant, and equipment, net Investments in "strategic partner" suppliers Total assets $ $ 15 75 18 192 300 1,045 665 35 1,000 Liabilities and shareholders' equity: Accounts payable and accrued expenses Income taxes payable Notes payable - current portion (Note 5) Bonds payable - current portion (Note 5) Total current liabilities Notes payable - noncurrent portion (Note 5) Total liabilities Total common shareholders' equity (Note 7) Total liabilities and shareholders' equity $ $ 170 20 10 50 250 100 250 600 400 1,000

(380) Bonds payable - noncurrent portion (Note 5)

Excerpts from FY 20X4 financial statement footnotes . . . Note 5 - Debt The company's debt at December 31, 20X4 is comprised of notes and bonds payable, as follows: ($US in millions) Weighted average interest Principal balance rate outstanding 4.00% 5.00% 6.00% $ 54 56 300 410 (60) $ 350 The amounts of debt outstanding as of December 31, 20X4 that is payable in each of following five years and for all remaining years thereafter in the aggregate are: FYE Dec. 31, 20X5 20X6 20X7 20X8 20X9 Thereafter Total $ Principal due $ 60 65 60 60 55 110 410

Notes payable to banks Notes payable to other lenders 6.0 percent serial bonds Total Less current portion Noncurrent portion

In January 20X3, the company issued a $30 million note to a syndicate of banks in connection with a seven-year term loan that bears a fixed 4.25 percent interest rate. The loan is secured by the company's assets and subject to financial and other covenants, including a requirement that the company maintain a total debt ratio not exceeding 1.5:1 (or 1.50). Note 7 - Shareholders' equity The company's articles of incorporation authorize it to issue up to 25 million shares of the company's common stock, par value $5 per share. At December 31, 20X4, 22.0 million shares of the company's common stock were issued and 2.154 million of those shares were held by the company as treasury stock. The company's articles authorize it to issue up to 2.5 million shares of 8 percent preferred stock, $100 par value, for which dividends shall be cumulative. At December 31, 20X4, the company had issued no shares of preferred stock. Market information The company's 6.0 percent serial bonds are currently rated "single A" (Standard & Poors) and "A2" (Moody's Investor Services) Current market yields on "single A" corporate securities, by term to maturity are: 1 year 2 years 3 years 4 years 5 years 4.625% 5.000% 5.375% 5.750% 6.125% 6 years 7 years 8 years 9 years 10 years 6.500% 6.875% 7.250% 7.625% 8.000%

The company's common stock currently trades at $25 per share on the NASDAQ. The facilitator will grade this assignment, assigning up to 100 points for it as follows: Complete, accurate, and clear presentation of calculations of the estimated fair value of: The specified individual company bond or note issue The companys aggregate debt portfolio (1) Clear and accurate indication of the apparent total fair value ($US) of assets unrecognized or under-valued in the balance sheet and (2) clear, concise, and complete description of the possible kinds or categories of assets that could be unrecognized or under-valued and the apparent reasons for this Total points 10 75 Maximum Earned

10 points 75

15 100

15 100

Instructions: Use the information in the first worksheet tab (Instructions and company information) to complete the analysis in this tab. Show all computations in good form and label properly all amounts presented . Compute the current fair value of the bank note syndicated in 20X3, showing separately to the nearest whole $US dollar (1) the present value of the principal (face) amount of the note and (2) the present value of related interest payments due under the note

Remaining semi-annual interest Outstanding payment debt principal at Year of periods (Years Dec. 31, 20X4 maturity (1) to maturity ($US millions)

Semi-annual Interest Rate Payment

Estimated fair value (PV of debt principal Current yield on comparably rated debt outstanding and Semiinterest Annual yield annual payments) ($US Term

Thereafter

B Years (B / A)

Total (1) Assume all debt outstanding requires semi-annual interest payments and matures December 31 of years disclosed. (2) Show your computation of the estimated weighted average interest rate on the debt "portfolio" using footnote information, below: Debt footnote information Weighted average Principal interest balance rate outstanding

Percent of total

Wghtd avg int rate X Percent of total