OYou have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), which is planning itsoperation for the coming year. The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO isconcerned about the impact of a change in the payout ratio from the 10% that was used in the past to 75%, which the firm's investment bankershave recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from10% to the new and higher level? All dollars are in millions.Last year's sales - SoSales growth rate=gLast year's total assets - AgLast year's profit margin = PMSelect the correct answer.O a $533Ob $50.7O $54.6Od. 152.0O. 1572Dewan Ke-17p9607xlsx AExercise 13-17 (1)adsx$300.040%$50020.0%Last year's accounts payableLast year's notes payableLast year's accrualsInitial payout ratioEXERCISE 13-17 D.xlsxA0 Exercise 13-17.xlsx$50.0$15.0$20.010.0%Show allA-Z9.

AFN (additional funds needed) is the term used for the amount needed to be raised from external…

Answered: You have been asked to forecast the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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As corporate manager for acquisitions, your group is assessing a project that is expected to produce cash flows of $750 at the end year 1, $1,000 at the end of year 2, $850 at the end of year 3, and $2,900 at the end of year 4. If the firm requires a minimum IRR or "hurdle rate" of 10% for these types of investments, what is most you should pay for this project?Your answer should be between 2738.00 and 4355.00 rounded to 2 decimal places, with no special characters.
In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Last year's sales = S0 $200,000 Last year's accounts payable $50,000 Sales growth rate = g 40% Last year's notes payable $15,000 Last year's total assets = A0* $125,000 Last year's accruals $20,000 Last year's profit margin = PM 20.0% Target payout ratio 25.0% Select the correct answer. a. - $20,040 b. - $19,960 c. - $20,060 d. - $20,020 e. - $20,000
Lana is thinking about making an iventment in a new venture called BluePearl - after performing an analysis of similar firms, she discovered several other firms (3) with the following Enterprise Value to FCF ratios: Firm 1: 5.9 Firm 2: 7.6 Firm 3: 9.1 The cashflows for BluePearl this year are expected to be $1,300,000. If BluePearl doesn't have any debt or cash currently, and 700,000 shares outstanding - what is the Price Per Share for BluePearl?
In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Last year's sales = S0 $200,000 Last year's accounts payable $50,000 Sales growth rate = g 40% Last year's notes payable $15,000 Last year's total assets = A0* $135,000 Last year's accruals $20,000 Last year's profit margin = PM 20.0% Target payout ratio 25.0% Select the correct answer. a. - $15,940 b. - $16,000 c. - $16,060 d. - $16,030 e. - $16,090
During the past few years, Super Technologies has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. As the assistant to the financial vice-president, it is your task is to estimate Super’s weighted average cost of capital (WACC). The VP has provided you with the following information: The firms’ tax rate is 40%. The current market price of Super’s outstanding bonds is $1,153.72. The bonds have an annual coupon rate of 12% and make coupon payments semiannually. The bonds mature in 15 years and have a par value of $1,000. The current price of the firm’s preferred stock is $113.10 per share. The stock has a $100 par value and a 10% annual dividend rate (paid annually). The current price of the firm’s common stock is $50 per share.…
Budget Wings Airlines is considering upgrading its fleet of aircraft as it expands from a regional airline to one offering service to a more nationwide portfolio of cities and airports. In support of this process, the CFO has asked you to determine the appropriate weighted average cost of capital (WACC) to use in the discounted cash flow analysis. You spend the morning gathering the following information: - Budget Wings has debt outstanding with a market value of $150 million. This debt is in the form of bonds that are currently priced at $946.33 per $1,000 face value and pay a coupon of 3.45%. The current yield-to-maturity (YTM) on these bonds is 4.11%. - Budget Wings stock is currently priced at $54.41 per share. You expect that next year's dividend will be $3.75 and you expect dividends to grow at 3%. The current market value of Budget Wings' common equity is $240 million. - Budget Wings has preferred equity outstanding with a market value of $30 million that offers an annual…
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You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), which is planning its operation for the coming year. The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 55%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions. Last year's sales = S0 $300.0 Last year's accounts payable $50.0 Sales growth rate = g 40% Last year's notes payable $15.0 Last year's total assets = A0* $500 Last year's accruals $20.0 Last year's profit margin = PM 20.0% Initial payout ratio 10.0% Select the correct answer. a. $34.4 b. $42.9 c. $37.8 d. $41.2…
As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of the investments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment in precious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease in the value of each investment for each state of the economy. Expanding Economic economy recession Stock market investment Commodity investment 30 5 -10 20 (a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.) stocks $ commodities $

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