(Forecasting financing needs) The current balance sheet of the Murphy Forklifts, Inc., is as follows: Murphy had sales for the year ended December 31, 2016, of $50.00 million. The firm follows a policy of paying all net earnings out to its common stockholders in cash dividends. Thus, Murphy generates no funds from its earnings that can be used to expand its operations. (Assume that depreciation expense is equal to the cost of replacing worn-out assets.). Hint. Make sure to round all intermediate calculations to at least five decimal places. a. If Murphy anticipates sales of $100.00 million during the coming year, develop a pro forma balance sheet for the firm for December 31, 2017. Assume that current assets are a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percentage o sales. Use notes payable as a balancing entry. b. How much new financing will Murphy need next year? c. What are the limitations of the percent-of-sales forecast method? Discuss briefly. a. If Murphy anticipates sales of $100.00 million during the coming year, develop a pro forma balance sheet for the firm for December 31, 2017. Assume that current assets are a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percentage o sales. Use notes payable as a balancing entry. (Round to the nearest dollar.) Murphy Forklifts, Inc. Pro Forma Balance Sheet as of 12/31/17 Current assets $ Net fixed assets Total assets Accounts payable Notes payable Bonds payable Common equity Total liabilities and common equity $ S 200000000 15000000 215000000 10000000 185000000 10000000 10000000 215000000 Data table Murphy Forklifts, Inc., Balance Sheet, December 31, 2016 ($ millions) Current assets $10.00 Accounts payable 15.00 Notes payable $25.00 Net fixed assets Total Bonds payable Common equity Total (Click on the icon in order to copy its contents into a spreadsheet.) $5.00 0.00 10.00 10.00 $25.00 - X X
(Forecasting financing needs) The current balance sheet of the Murphy Forklifts, Inc., is as follows: Murphy had sales for the year ended December 31, 2016, of $50.00 million. The firm follows a policy of paying all net earnings out to its common stockholders in cash dividends. Thus, Murphy generates no funds from its earnings that can be used to expand its operations. (Assume that depreciation expense is equal to the cost of replacing worn-out assets.). Hint. Make sure to round all intermediate calculations to at least five decimal places. a. If Murphy anticipates sales of $100.00 million during the coming year, develop a pro forma balance sheet for the firm for December 31, 2017. Assume that current assets are a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percentage o sales. Use notes payable as a balancing entry. b. How much new financing will Murphy need next year? c. What are the limitations of the percent-of-sales forecast method? Discuss briefly. a. If Murphy anticipates sales of $100.00 million during the coming year, develop a pro forma balance sheet for the firm for December 31, 2017. Assume that current assets are a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percentage o sales. Use notes payable as a balancing entry. (Round to the nearest dollar.) Murphy Forklifts, Inc. Pro Forma Balance Sheet as of 12/31/17 Current assets $ Net fixed assets Total assets Accounts payable Notes payable Bonds payable Common equity Total liabilities and common equity $ S 200000000 15000000 215000000 10000000 185000000 10000000 10000000 215000000 Data table Murphy Forklifts, Inc., Balance Sheet, December 31, 2016 ($ millions) Current assets $10.00 Accounts payable 15.00 Notes payable $25.00 Net fixed assets Total Bonds payable Common equity Total (Click on the icon in order to copy its contents into a spreadsheet.) $5.00 0.00 10.00 10.00 $25.00 - X X
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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I worked out part a, but not sure what I did wrong. Please show work and explain, thank you.
Question 5
Transcribed Image Text:(Forecasting financing needs) The current balance sheet of the Murphy Forklifts, Inc., is as follows: Murphy had sales for the year ended December 31, 2016, of $50.00 million. The firm follows a policy of paying all net earnings out to its common stockholders in cash
dividends. Thus, Murphy generates no funds from its earnings that can be used to expand its operations. (Assume that depreciation expense is equal to the cost of replacing worn-out assets.). Hint. Make sure to round all intermediate calculations to at least five decimal places.
a. If Murphy anticipates sales of $100.00 million during the coming year, develop a pro forma balance sheet for the firm for December 31, 2017. Assume that current assets are a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percentage of
sales. Use notes payable as a balancing entry.
b. How much new financing will Murphy need next year?
c. What are the limitations of the percent-of-sales forecast method? Discuss briefly.
a. If Murphy anticipates sales of $100.00 million during the coming year, develop a pro forma balance sheet for the firm for December 31, 2017. Assume that current assets are a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percentage of
sales. Use notes payable as a balancing entry. (Round to the nearest dollar.)
Murphy Forklifts, Inc.
Pro Forma Balance Sheet as of 12/31/17
Current assets
Net fixed assets
Total assets
Accounts payable
Notes payable
Bonds payable
Common equity
Total liabilities and common equity
$
$
$
200000000
15000000
215000000
10000000
185000000
10000000
10000000
215000000
***
Data table
Murphy Forklifts, Inc., Balance Sheet, December 31, 2016 ($ millions)
$10.00
Current assets
Accounts payable
15.00 Notes payable
$25.00
Net fixed assets
Total
Bonds payable
Common equity
Total
(Click on the icon in order to copy its contents into a spreadsheet.)
$5.00
0.00
10.00
10.00
$25.00
-
X
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