In 1998, Hepler Company's sales were $26 million and its total assets were $10 million. Current liabilities were $4 million and total equity was $2 million. Hepler Company's sales for 1999 are forecasted to be $34 million, earnings after taxes are expected to be 5 percent of sales and dividends of $800,000 are expected to be paid. Assuming that the ratios "assets to sales" and "current liabilities to sales" in 1998 remain the same in 1999, determine the amount of additional financing required.
In 1998, Hepler Company's sales were $26 million and its total assets were $10 million. Current liabilities were $4 million and total equity was $2 million. Hepler Company's sales for 1999 are forecasted to be $34 million, earnings after taxes are expected to be 5 percent of sales and dividends of $800,000 are expected to be paid. Assuming that the ratios "assets to sales" and "current liabilities to sales" in 1998 remain the same in 1999, determine the amount of additional financing required.
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 1998, Hepler Company's sales were $26 million and its total assets were $10 million. Current liabilities were $4 million and total equity was $2 million. Hepler Company's sales for 1999 are
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AFN = [((Total Assets/Sales)(∆Sales))-((Current Liabilities/Sales)(∆Sales))] - (Earnings After Tax - Dividends)
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