The Podrasky Corporation is considering a $175 million expansion (capital expenditure) program next year. The company currently has $400 million in net fixed assets on its books. Next year, the company expects to earn $70 million after interest and taxes. The company also expects to maintain its present level of dividends, which is $15 million. If the expansion program is accepted, the company expects its inventory and accounts receivable each to increase by approximately $25 million next year. Long-term debt retirement obligations total $14 million for next year, and depreciation is expected to be $80 million. The company does not expect to sell any fixed assets next year. The company maintains a cash balance of $2 million, which is sufficient for its present operations. If the expansion is accepted, the company feels it should increase its year-end cash balance to $8 million because of the increased level of activities. For planning purposes, assume no other cash flow changes for next year. Calculate how much additional financing (if any) will be required if the company decides to go through with the expansion program. Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.
The Podrasky Corporation is considering a $175 million expansion (capital expenditure) program next year. The company currently has $400 million in net fixed assets on its books. Next year, the company expects to earn $70 million after interest and taxes. The company also expects to maintain its present level of dividends, which is $15 million. If the expansion program is accepted, the company expects its inventory and accounts receivable each to increase by approximately $25 million next year. Long-term debt retirement obligations total $14 million for next year, and depreciation is expected to be $80 million. The company does not expect to sell any fixed assets next year. The company maintains a cash balance of $2 million, which is sufficient for its present operations. If the expansion is accepted, the company feels it should increase its year-end cash balance to $8 million because of the increased level of activities. For planning purposes, assume no other cash flow changes for next year. Calculate how much additional financing (if any) will be required if the company decides to go through with the expansion program. Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.
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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Am. 112.
Transcribed Image Text:The Podrasky Corporation is considering a $175 million expansion (capital expenditure) program next year. The company currently
has $400 million in net fixed assets on its books. Next year, the company expects to earn $70 million after interest and taxes. The
company also expects to maintain its present level of dividends, which is $15 million. If the expansion program is accepted, the
company expects its inventory and accounts receivable each to increase by approximately $25 million next year. Long-term debt
retirement obligations total $14 million for next year, and depreciation is expected to be $80 million. The company does not expect to
sell any fixed assets next year. The company maintains a cash balance of $2 million, which is sufficient for its present operations. If the
expansion is accepted, the company feels it should increase its year-end cash balance to $8 million because of the increased level of
activities. For planning purposes, assume no other cash flow changes for next year. Calculate how much additional financing (if any)
will be required if the company decides to go through with the expansion program. Enter your answer in millions. For example, an
answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.
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