Assume that a firm has Sales of $25,000,000, total assets of $20,000,000, current assetsof $8,000,000, spontaneous liabilities of $3,000,000, a profit margin of 3.825 percent, atax rate of 40%, and a dividend payout rate of 60 percent. Also assume that sales areexpected to increase to $28,000,000 for the coming year and that the firm will not needto increase its fixed assets at this level of sales. Given this information, and using theequation approach, determine the additional funds needed for the coming year.O $180,000O $171,600O $177,200O $168,800O $174,400

What is Additional Funds NeededAFN, or additional funds needed, refers to the additional finances…

Answered: Assume that a firm has Sales of…

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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A firm has Sales of $25,000,000, total assets of $22,000,000, current assets of $8,000,000, spontaneous liabilities of $5,000,000, a profit margin of 5 percent, a tax rate of 40%, and a dividend payout rate of 20 percent. Sales are expected to increase to $28,000,000 for the coming year, and the firm will need to increase its fixed assets at this level of sales (that is, fixed assets will increase proportionately with sales). Given this information, and using the equation approach, determine the additional funds needed for the coming year. O $950,000 O $1.010,000 Ⓒ$920.000 $980,000 O $1,040,000
Assume that a firm has Sales of $25,000,000, total assets of $20,000,000, current assets of $8,000,000, spontaneous liabilities of $3,000,000, a profit margin of 3.800 percent, a tax rate of 40%, and a dividend payout rate of 60 percent. Also assume that sales are expected to increase to $28,000,000 for the coming year and that the firm will not need to increase its fixed assets at this level of sales. Given this information, and using the equation approach, determine the additional funds needed for the coming year. O $168,800 $177,200 O $171.600 O $174.400 O $180,000
Assume the firm has a constant dividend payout ratio and a projected sales increase of 10 percent. All costs, assets, and current liabilities vary directly with sales. The firm is currently at full production. What is the external financing need? Currently, the firm’s sales =$5,700, net income is $520, total assets=8890, dividends=156, A/P =990, LTD= 3730, and common stock=2980, and retained earnings =1200. $146.00 $251.20 $379.60 $421.60 $550.30
Gbenda Corporation has sales of $91,200, net income of $18,240, dividends paid of $3,830, total assets of $456,000, and total liabilities of $182,400. Assume that all costs and assets change spontaneously with sales. The tax rate and dividend payout ratios remain constant. If the firm’s managers project a firm growth rate of 10 percent for next year, what will be the amount of external financing needed to support this level of growth? Assume the firm is currently operating at full capacity.Multiple Choice- $25,536- $29,749- $45,600- $65,664- $41,387
A firm expects to have a net income of $8,000,000 during the next year. Its target capital structure is 50% debt and 50% equity. The company has determined that the optimal capital budget for the coming year is $6,000,000. If the firm follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year's dividend, then what is the firm's dividend payout ratio? O 28.5% O 40.0% O 50.5% O 62.5%
A company is projected to generate revenues of $336 million and $406 million over the next two years. After that, the company is assumed to enter its terminal phase with steady growth. Given the following information, how much is each share worth today? Answer in dollars rounded to one decimal place. Forecasted operating margin: 35.4%. Forecasted tax rate: 22.2%. Forecasted reinvestment rate: 30%. Forecasted steady growth rate of free cash flow: 1.3% per year. Cost of capital: 13.2%. Debt: $40 million. Cash: $35 million. Shares outstanding: 12 million.
Consider a company that is projected to generate revenues of $104 million next year. Analysts expect revenues to grow at a 4.6% annual rate for the following two years (until the end of year 3) and then at a stable rate of 2.5% in perpetuity. If the company is expected to have a gross margin of 75%, operating margin of 35%, net margin of 25%, tax rate of 16.4%, and reinvestment rate of 34%, what is its expected free cash in four years from today? Answer in millions, rounded to one decimal place
A company expects sales of $420 million next year assuming a 20% increase from the previous year. The firm anticipates $29.17 million in retained earnings after taxes and dividends have been paid, assuming that $1 million in depreciation expense have been deducted. Working capital is expected to represent 40% of change in sales. Required: Determine the amount of surplus (or deficit) in funds. k (INPUT YOUR ANSWER IN K, ROUNDED TO 2 DECIMAL PLACES. FOR EXAMPLE: 1.23. USE THE MINUS SIGN TO INDICATE A NEGATIVE ANSWER. FOR EXAMPLE: -1.23)
Blur Corp. has an expected net operating profit after taxes, EBIT(1-T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) is Blur Corp. expected to generate over the next year? O $118,668 million $6,450 million O $8,730 million O $6,470 million Blur Corp.'s FCFs are expected to grow at a constant rate of 4.62% per year in the future. The market value of Blur Corp.'s outstanding debt is $31,412 million, and its preferred stocks' value is $17,451 million. Blur Corp. has 150 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 13.86%. Term Total firm value Intrinsic value of common equity Intrinsic value per share Value (Millions) Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table.…
Suppose that TV Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? Assets Liabilities and Equity Current assets $ 1,000,000 Current liabilities $ 1,000,000 Fixed assets 2,000,000 Long-term debt 1,000,000 Equity 1,000,000 Total assets $ 3,000,000 Total liabilities and equity $ 3,000,000
Value in Valuation, Inc. is assessing the value of two companies, Company A and Company B, which projects average net cashflows in the next five years of P4,000,000 and 3,000,000, respectively. The required rate of return is both 8%. Which of the following has the higher equity value and by how much? And assuming that Company A is being sold at P48,000,000 while Company B is being sold at P36,500,000, what should be Value in Valuation’s best recommendation among the following choices: 1. To buy Company A because the selling price is higher than its equity value 2. To buy Company A because it is being sold at a discount of P2,000,000 3. To buy Company B because the selling price is lower than its equity value 4. To buy Company B because it is being sold at a premium of P1,000,000
Blur Corp. has an expected net operating profit after taxes, EBIT(1-T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) Is Blur Corp. expected to generate over the next year? ○ $118,668 million $6,450 million ○ $8,730 million O $6,470 million Blur Corp.'s FCFs are expected to grow at a constant rate of 4.62% per year in the future. The market value of Blur Corp.'s outstanding debt is $31,412 million, and its preferred stocks' value is $17,451 million. Blur Corp. has 150 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 13.86%. Term Total firm value Intrinsic value of common equity Intrinsic value per share Value (Millions) Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table.…

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