Conn Man's Shops, a national clothing chain, had sales of $360 million last year. The business has a steady net profit margin of 7 percent and a dividend payout ratio of 20 percent. The balance sheet for the end of last year is shown. Assets Cash Accounts receivable Inventory Plant and equipment Total assets Balance Sheet End of Year (in $ millions) Liabilities and Stockholders' Equity $ 23 Accounts payable $ 68 38 Accrued expenses 29 80 Other payables 35 $ 147 Common stock 46 Retained earnings 110 $ 288 $ 288 Total liabilities and stockholders' equity The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for overcoats and wool slacks. A sales increase of 20 percent is forecast for the company. All balance sheet items are expected to maintain the same percent-of-sales relationships as last year," except for common stock and retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained earnings will change as dictated by the profits and dividend policy of the firm. (Remember, the net profit margin is 7 percent.) *This includes fixed assets, since the firm is at full capacity. a. Will external financing be required for the company during the coming year? O Yes O No b. What would be the need for external financing if the net profit margin went up to 8.50 percent and the dividend payout ratio was increased to 50 percent? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in dollars, not millions, (e.g., $1,234,567). Input your answer as positive a value. Required new funds
Conn Man's Shops, a national clothing chain, had sales of $360 million last year. The business has a steady net profit margin of 7 percent and a dividend payout ratio of 20 percent. The balance sheet for the end of last year is shown. Assets Cash Accounts receivable Inventory Plant and equipment Total assets Balance Sheet End of Year (in $ millions) Liabilities and Stockholders' Equity $ 23 Accounts payable $ 68 38 Accrued expenses 29 80 Other payables 35 $ 147 Common stock 46 Retained earnings 110 $ 288 $ 288 Total liabilities and stockholders' equity The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for overcoats and wool slacks. A sales increase of 20 percent is forecast for the company. All balance sheet items are expected to maintain the same percent-of-sales relationships as last year," except for common stock and retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained earnings will change as dictated by the profits and dividend policy of the firm. (Remember, the net profit margin is 7 percent.) *This includes fixed assets, since the firm is at full capacity. a. Will external financing be required for the company during the coming year? O Yes O No b. What would be the need for external financing if the net profit margin went up to 8.50 percent and the dividend payout ratio was increased to 50 percent? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in dollars, not millions, (e.g., $1,234,567). Input your answer as positive a value. Required new funds
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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Transcribed Image Text:Conn Man's Shops, a national clothing chain, had sales of $360 million last year. The business has a steady net profit
margin of 7 percent and a dividend payout ratio of 20 percent. The balance sheet for the end of last year is shown.
Assets
Cash
Accounts receivable
Inventory
Plant and equipment
Total assets
Balance Sheet End of Year (in $ millions)
Liabilities and Stockholders' Equity
$ 23 Accounts payable
$ 68
38
Accrued expenses
29
80
Other payables
35
$ 147
Common stock
46
Retained earnings
110
$ 288
$ 288 Total liabilities and stockholders' equity
The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for
overcoats and wool slacks. A sales increase of 20 percent is forecast for the company.
All balance sheet items are expected to maintain the same percent-of-sales relationships as last year," except for common
stock and retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained
earnings will change as dictated by the profits and dividend policy of the firm. (Remember, the net profit margin is 7
percent.)
*This includes fixed assets, since the firm is at full capacity.
a. Will external financing be required for the company during the coming year?
O Yes
O No
b. What would be the need for external financing if the net profit margin went up to 8.50 percent and the dividend payout
ratio was increased to 50 percent?
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your
answer in dollars, not millions, (e.g., $1,234,567). Input your answer as positive a value.
Required new funds
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