(12-1) Broussard Skateboard's sales are expected to increase by 15% from $8 million in2013 to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013.Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 40%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year.
(12-1) Broussard Skateboard's sales are expected to increase by 15% from $8 million in2013 to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013.Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 40%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Refer Figures 12-1, 12-2 and 12-3 and Prepare a fully automated & linked Excel sheet linking all three sheets for compute intrinsic value of shares.
Transcribed Image Text:(12-1) Broussard Skateboard's sales are expected to increase by 15% from $8 million in2013 to
$9.2 million in 2014. Its assets totaled $5 million at the end of 2013.Broussard is already at full
capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current
liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes
payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the
forecasted payout ratio is 40%. Use the AFN equation to forecast Broussard's additional funds
needed for the coming year.
(12-2) Refer to Problem 12-1. What would be the additional funds needed if the company's year-
end 2013 assets had been $7 million? Assume that all other numbers, including sales, are the
same as in Problem 12-1 and that the company is operating at full capacity. Why is this AFN
different from the one you found in Problem 12-1? Is the company's "capital intensity "ratio the
same or different?
(12-3) Refer to Problem 12-1. Return to the assumption that the company had $5 million in
assets at the end of 2013, but now assume that the company pays no dividends. Under these
assumptions, what would be the additional funds needed for the coming year? Why is this AFN
different from the one you found in Problem 12-1?
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