Assume that a firm has Sales of $25,000,000, total assets of $20,000,000, current assetsof $8,000,000, spontaneous liabilities of $3,000,000, a profit margin of 3.825 percent, atax rate of 40%, and a dividend payout rate of 60 percent. Also assume that sales areexpected to increase to $28,000,000 for the coming year and that the firm will not needto increase its fixed assets at this level of sales. Given this information, and using theequation approach, determine the additional funds needed for the coming year.O $180,000O $171,600O $177,200O $168,800O $174,400

What is Additional Funds NeededAFN, or additional funds needed, refers to the additional finances…

Answered: Assume that a firm has Sales of…

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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Assume that a firm has Sales of $25,000,000, total assets of $20,000,000, current assets of $8,000,000, spontaneous liabilities of $3,000,000, a profit margin of 3.800 percent, a tax rate of 40%, and a dividend payout rate of 60 percent. Also assume that sales are expected to increase to $28,000,000 for the coming year and that the firm will not need to increase its fixed assets at this level of sales. Given this information, and using the equation approach, determine the additional funds needed for the coming year. $174.400 $180,000 O $177.200 O $168.800 O $171.600
A firm has Sales of $25,000,000, total assets of $22,000,000, current assets of $8,000,000, spontaneous liabilities of $5,000,000, a profit margin of 5 percent, a tax rate of 40%, and a dividend payout rate of 20 percent. Sales are expected to increase to $28,000,000 for the coming year, and the firm will need to increase its fixed assets at this level of sales (that is, fixed assets will increase proportionately with sales). Given this information, and using the equation approach, determine the additional funds needed for the coming year. O $950,000 O $1.010,000 Ⓒ$920.000 $980,000 O $1,040,000
Suppose that Maphisa Plc has the following balance sheet and that sales for the year just ended were $7 million. The firm also has a profit margin of 27 percent, a retention ratio of 20 percent, and expects sales of $8 million next year. If all assets and current liabilities are expected to grow with sales, what additional funds will Maphisa Plc need from external sources to fund the expected growth? Assets Liabilities and Equity
Gbenda Corporation has sales of $91,200, net income of $18,240, dividends paid of $3,830, total assets of $456,000, and total liabilities of $182,400. Assume that all costs and assets change spontaneously with sales. The tax rate and dividend payout ratios remain constant. If the firm’s managers project a firm growth rate of 10 percent for next year, what will be the amount of external financing needed to support this level of growth? Assume the firm is currently operating at full capacity.Multiple Choice- $25,536- $29,749- $45,600- $65,664- $41,387
A firm expects to have a net income of $8,000,000 during the next year. Its target capital structure is 50% debt and 50% equity. The company has determined that the optimal capital budget for the coming year is $6,000,000. If the firm follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year's dividend, then what is the firm's dividend payout ratio? O 28.5% O 40.0% O 50.5% O 62.5%
A company is projected to generate revenues of $336 million and $406 million over the next two years. After that, the company is assumed to enter its terminal phase with steady growth. Given the following information, how much is each share worth today? Answer in dollars rounded to one decimal place. Forecasted operating margin: 35.4%. Forecasted tax rate: 22.2%. Forecasted reinvestment rate: 30%. Forecasted steady growth rate of free cash flow: 1.3% per year. Cost of capital: 13.2%. Debt: $40 million. Cash: $35 million. Shares outstanding: 12 million.
A company expects sales of $420 million next year assuming a 20% increase from the previous year. The firm anticipates $29.17 million in retained earnings after taxes and dividends have been paid, assuming that $1 million in depreciation expense have been deducted. Working capital is expected to represent 40% of change in sales. Required: Determine the amount of surplus (or deficit) in funds. k (INPUT YOUR ANSWER IN K, ROUNDED TO 2 DECIMAL PLACES. FOR EXAMPLE: 1.23. USE THE MINUS SIGN TO INDICATE A NEGATIVE ANSWER. FOR EXAMPLE: -1.23)
Suppose that TV Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? Assets Liabilities and Equity Current assets $ 1,000,000 Current liabilities $ 1,000,000 Fixed assets 2,000,000 Long-term debt 1,000,000 Equity 1,000,000 Total assets $ 3,000,000 Total liabilities and equity $ 3,000,000
Value in Valuation, Inc. is assessing the value of two companies, Company A and Company B, which projects average net cashflows in the next five years of P4,000,000 and 3,000,000, respectively. The required rate of return is both 8%. Which of the following has the higher equity value and by how much? And assuming that Company A is being sold at P48,000,000 while Company B is being sold at P36,500,000, what should be Value in Valuation’s best recommendation among the following choices: 1. To buy Company A because the selling price is higher than its equity value 2. To buy Company A because it is being sold at a discount of P2,000,000 3. To buy Company B because the selling price is lower than its equity value 4. To buy Company B because it is being sold at a premium of P1,000,000
Tropetech Inc. has an expected net operating profit after taxes, EBIT(1 – T), of $16,300 million in the coming year. In addition, the firm is expected to have net capital expenditures of $2,445 million, and net operating working capital (NOWC) is expected to increase by $50 million. How much free cash flow (FCF) is Tropetech Inc. expected to generate over the next year? $13,805 million $331,476 million $18,695 million $13,905 million
VWX Inc., has sales of $500,000, net income of $80,000, dividend payout of 50%, total assets of $700,000 and target debt-equity ratio of 1.5. If the company grows at its sustainable growth rate in the coming year, how much new borrowing (to the nearest dollar) will take place?
Suppose that Barone Corporation's sales are expected to increase from $5 million this year (year 0) to $6 million next year (year 1). Its assets totaled $2,500,000 in year 0. Barone is at full capacity, so its assets must grow in proportion to projected sales. At the end of year 0, current liabilities are $800,000, consisting of $200,000 of accounts payable, $400,000 of notes payable, and $200,000 of accrued liabilities. Barone's profit margin is forecasted to be 3.00% and the forecasted retention ratio is 25.00%. Barone seeks to forecast the additional funds needed using the AFN equation. Let A represent Barone's assets and So represent sales in year 0. Let AS represent the change in sales in from year 0 to year 1. According to the video, which of the following best represents the projected increase in assets as part of the AFN equation? -AS + AS × AS × So Using the formula from the video, the projected increase in assets, as part of the AFN equation, is

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