Green Moose Industries has the following end-of-year balance sheet: Green Moose Industries Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents Accounts payable Accounts receivable Accrued liabilities Inventories Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) Total Assets O $64,000 $150,000 400,000 350,000 $900,000 O $57,600 $2,100,000 O $54,400 $3,000,000 O $51,200 Notes payable Total Current Liabilities Long-Term Bonds Total Debt Common Equity Common stock Retained earnings Total Common Equity Total Liabilities and Equity The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Green Moose Industries generated $400,000 net income on sales of $13,500,000. The firm expects sales to increase by 16% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. Suppose Green Moose's assets are fully utilized. Using the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support a firm's expected sales, it is projected that Green Moose will require in additional assets. $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Green Moose this year? 800,000 700,000 $1,500,000 $3,000,000 Given the preceding information, Green Moose expects to generate earnings. (Hint: Round your answer to the nearest whole dollar.) In addition, Green Moose Industries is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. from operations that will be added to its existing retained
Green Moose Industries has the following end-of-year balance sheet: Green Moose Industries Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents Accounts payable Accounts receivable Accrued liabilities Inventories Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) Total Assets O $64,000 $150,000 400,000 350,000 $900,000 O $57,600 $2,100,000 O $54,400 $3,000,000 O $51,200 Notes payable Total Current Liabilities Long-Term Bonds Total Debt Common Equity Common stock Retained earnings Total Common Equity Total Liabilities and Equity The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Green Moose Industries generated $400,000 net income on sales of $13,500,000. The firm expects sales to increase by 16% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. Suppose Green Moose's assets are fully utilized. Using the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support a firm's expected sales, it is projected that Green Moose will require in additional assets. $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Green Moose this year? 800,000 700,000 $1,500,000 $3,000,000 Given the preceding information, Green Moose expects to generate earnings. (Hint: Round your answer to the nearest whole dollar.) In addition, Green Moose Industries is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. from operations that will be added to its existing retained
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
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Transcribed Image Text:Green Moose Industries has the following end-of-year balance sheet:
Green Moose Industries Balance Sheet For the Year Ended on December 31
Assets
Liabilities
Current Assets:
Current Liabilities:
Accounts payable
Accrued liabilities.
Notes payable
Total Current Liabilities
Cash and equivalents
Accounts receivable
Inventories
Total Current Assets
Net Fixed Assets:
Net plant and equipment
(cost minus depreciation)
Total Assets
O $64,000
$150,000
400,000
350,000
$900,000
O $57,600
Long-Term Bonds
O $54,400
$2,100,000 Total Debt
O $51,200
Common Equity
Common stock
Retained earnings
Total Common Equity
$3,000,000 Total Liabilities and Equity
The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended,
Green Moose Industries generated $400,000 net income on sales of $13,500,000. The firm expects sales to increase by 16% this coming year and
also expects to maintain its long-run dividend payout ratio of 40%.
Suppose Green Moose's assets are fully utilized. Using the additional funds needed (AFN) equation to determine the increase in total assets that is
necessary to support a firm's expected sales, it is projected that Green Moose will require
in additional assets.
$250,000
150,000
100,000
$500,000
1,000,000
$1,500,000
When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate
internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Green
Moose this year?
800,000
700,000
$1,500,000
$3,000,000
Given the preceding information, Green Moose expects to generate $
earnings. (Hint: Round your answer to the nearest whole dollar.)
In addition, Green Moose Industries is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will
retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from
the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant.
from operations that will be added to its existing retained
According to the AFN equation and projections for Green Moose Industries, the firm's AFN is
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Step 1: Formula.
VIEWStep 2: Computation of Expected sales in next year
VIEWStep 3: answer to part 1. Computation of Increase in assets required.
VIEWStep 4: answer to part 2 . Computation of amount of Increase in assets supplied by Spontaneous liabilities.
VIEWStep 5: answer to part 3. income from operations that will be added to its existing retained earnings.
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