216 Chapter 9Required:The firm operated at full capacity in 20X4. It expects sales to increase by 20percent during 20X5 and expects 20X5 dividends per share to increase toP1.10. Use the projected financial statement method to determine how muchoutside financing is required, developing the firm's pro forma statement offinancial position and income statement, and use AFN as balancing item.b. If the firm must maintain a current ratio of 2.3 and a debt ratio of 40 percent,how much financing, after the first pass will be obtained using notes payable,long-term debt, and common stock?C.Make the second pass financial statements incorporating financing feedbacks,using the ratios in (b). Assume that the interest rate on debt averages 10percent.Problem 8 (Long-term financing needed)At year-end 20X4, total assets for Geneva Corporation were P1.2 million andaccounts payable were P375,000. Sales, which in 20X4 were P2.5 million, areexpected to increase by 25 percent in 20X5. Total assets and accounts payable areproportional to sales and that relationship will be maintained. Geneva typicallyuses no current liabilities other than accounts payable. Common stock amountedto P425,000 in 20X4 and retained earnings were P295,000. Geneva plans to sellnew common stock in the amount of P75,000. The firm's profit margin on sales is6 percent; 40 percent of earnings will be paid out as dividends.Required:a.What was Geneva's total debt in 20X4?b. How much new, long-term debt financing will be needed in 20X5?

Here, To Find: Part a. Total debt in year 20X4 =? Part b. New long -term debt financing needed in…

At year-end 20X4, total assets for Geneva Corporation were P1.2 million and accounts payable were P375,000. Sales, which in 20X4 were P2.5 million, are expected to increase by 25 percent in 20X5. Total assets and accounts payable are proportional to sales and that relationship will be maintained. Geneva typically uses no current liabilities other than accounts payable. Common stock amounted to P425,000 in 20X4 and retained earnings were P295,000. Geneva plans to sell new common stock in the amount of P75,000. The firm's profit margin on sales is 6 percent; 40 percent of earnings will be paid out as dividends. Required: a. What was Geneva's total debt in 20X4? b. How much new, long-term debt financing will be needed in 20X5?

At year-end 20X4, total assets for Geneva Corporation were P1.2 million and accounts payable were P375,000. Sales, which in 20X4 were P2.5 million, are expected to increase by 25 percent in 20X5. Total assets and accounts payable are proportional to sales and that relationship will be maintained. Geneva typically uses no current liabilities other than accounts payable. Common stock amounted to P425,000 in 20X4 and retained earnings were P295,000. Geneva plans to sell new common stock in the amount of P75,000. The firm's profit margin on sales is 6 percent; 40 percent of earnings will be paid out as dividends. Required: a. What was Geneva's total debt in 20X4? b. How much new, long-term debt financing will be needed in 20X5?

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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In 2018, Caterpillar Inc. had about 710 million shares outstanding. Their book value was $38.0 per share, and the market price was $85.00 per share. The company's balance sheet shows that the company had $29.50 billion of long-term debt, which was currently selling near par value. a. What was Caterpillar's book debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.) b. What was its market debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.) c. Which measure should you use to calculate the company's cost of capital? a. Book debt-to-value ratio b. C. Markeet debt-to-value ratio Measure
A company had total revenues of $59 million, operating margin of 35.1%, and depreciation and amortization expense of $13 million over the trailing twelve months. The company currently has $280 million in total debt and $116 million in cash and cash equivalents. The company's shares are currently trading at $33.2 per share and there are 13 million shares outstanding. What is its EV/EBITDA ratio? Round to one decimal place.
At last year’s end, total assets for Roberts Inc. were $1.2 million and accounts payable were $375,000. Sales, which last year were $2.5 million, are expected to increase by 25 percent this year. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Robert Inc. typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 last year, and retained earnings were $295,000. Roberts Inc. plans to sell new common stock in the amount of $75,000. The Firm’s profit margin on sales is 6 percent; and 60 percent of earnings will be retained. Set up Roberts Inc.’s last year balance sheet, to the extent possible, based on the information provided in this problem. Based on the balance sheet setup in Part a above, determine how much was Roberts Inc.’s long-term debt last year? Perform financial forecasting using percent of sales method (i.e., constant ratio method; do not use the AFN Equation) to determine how much…
In its most recent financial statements, Nessler Inc. reported $55 million of net income and $880 million of retained earnings. The previous retained earnings were $854 million. How much in dividends were paid to shareholders during the year? Assume that all dividends declared were actually paid. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar.
2.The Moon Company had net income in 2022 of AED 40 million. Here are some of the financial ratios from the annual report. Return on Assets = 5% Debt Assets Ratio = 55% Profit Margin = 4.5% Inventory in days = 20 days Using these ratios, calculate the following for the Remal Company: a) Salesb) Total assetsc) Total asset turnover d) Total debte) Stockholders' equity f) Return on equityg) Inventory
A company's sales in 2020 were $3.7 million and its total spontaneous assets were $9.7 million. Also in the same year, the firm's spontaneous liabilities consisted of $6.7 million in wages payable, $7.1 million in accounts payable, and $5.9 million in accrued expenses. The firm's profit margin is 5.5% and its dividend payout ratio is 3.1%. The balance sheet at year-end is similar in percentage of sales to that of previous years and this will continue in the future. Required: What is the percentage increase in sales that the company must achieve in order to avoid raising funds externally? Note: The term "k" is used to represent thousands (x $1,000). % (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)
Café Creations Incorporated has net cash flow from financing activities for the last year of $25 million. The company paid $15 million in dividends last year. During the year, the change in notes payable on the balance sheet was a decrease of $40 million, and change in common and preferred stock was an increase of $50 million. The end of year balance for long-term debt was $40 million. What was their beginning of year balance for long-term debt? Multiple Choice $20 million $30 million $40 million $10 million
At year-end 2020, RWD Inc.’s total assets were $1.2 million and its accounts payable were $375,000. Sales, which in 2020 were $2.5 million, are expected to increase by 25% in 2021. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. RWD typically uses no current liabilities other than accounts payable. Its profit margin on sales is 6%, and 40% of earnings will be paid out as dividends. Determine the amount of AFN for year 2021.
A company's total owner's equity at the start of the year was P400,000. The company produced a net profit of P200,000 throughout the year, distributed P50,000 in profits, and issued ordinary shares for a total of P200,000 in profits. What is the final balance of resources if the final debt is P200,000?
Binomial Tree Farm's financing includes $5 million of bank loans. Its common equity is shown in Binomial's Annual Report at $6.67 million. It has 500,000 shares of common stock outstanding, which trade on the Wichita Stock Exchange at $18 per share. What debt ratio should Binomial use to calculate its company cost of capital or asset beta? Note: Enter your answer as a percent rounded to 2 decimal places. Debt ratio %
A company's sales in 2020 were $5.2 million and its total spontaneous assets were $3.2 million. Also in the same year, the firm's spontaneous liabilities consisted of $3.1 million in wages payable. $3.3 million in accounts payable, and $9.5 million in accrued expenses. The firm's profit margin is 6.8% and its dividend payout ratio is 5.5% The balance sheet at year-end is similar in percentage of sales to that of previous years and this will continue in the future. Required: What is the percentage increase in sales that the company must achieve in order to avoid raising funds externally? Note: The term "k" is used to represent thousands (x $1.000). % (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)
Esther’s Egg Farm is constructing its pro forma financial statements for this year. At year end, assets were $400,000 and accounts payable (the only current liabilities account) were $125,000. Last year’s sales were $500,000. Esther’s expects to grow by 15 percent this year. Assets and accounts payable are expected to grow proportionally to sales. Common stock currently equals $140,000, and retained earnings are $98,000. Esther’s plans to sell $15,000 of new common stock this year. The firm’s profit margin on sales is 6 percent, and 40 percent of earnings will be paid out as dividends. How much new long-term debt financing will Esther’s need this year to finance its expected growth? Esther’s is currently operating at full capacity.

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