Inc. uses Additional Funds Needed as a plug item. If the company had forecast its additional financing needed to be 2,340,000, its capital budget at 3,600,000, and net income at 1,800,000, what is its retention ratio?
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Inc. uses Additional Funds Needed as a plug item. If the company had
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- Bulldogs Inc. uses Additional Funds Needed as a plug item. If the company had forecast its additional financing needed to be 2,340,000, its capital budget at 3,600,000, and net income at 1,800,000, what is its retention ratio?Put percentage sign (XX%)A company wants to invest $619,932 today. The expected returns in years 1, 2, and 3 are $244,539, $175,421, and $341,884, respectively. If the rate of return on investment must be at least 15%, and the probability of commercial and technical success are 0.89 and 0.86, respectively. What is the maximum expenditure justified that the company may spend?Jefferson City Computers has developed a forecasting model to determine the additional funds it needs in the upcoming year. All else being equal, which of the following factors is likely to increase its additional funds needed (AFN)? A sharp increase in its forecasted sales and the company's fixed assets are at full capacity. A reduction in its dividend payout ratio. The company reduces its reliance on trade credit that sharply reduces, its accounts payable. Statements a and b are correct. Statements a and c are correct.
- Consider the following information for Smart Products: total assets P1000; sales-P1540; net profit margin-12%; dividend payout ratio=40%; accounts payable=P308. If sales are forecast to increase 30%, the "short cut" estimate of external funds required (EFR) would be P________?The following information is given for Company: Asset = 7,000,000, Sales = 20,000,000, Spontaneous Liabilities = 25,00,000, Profit Margin = 6%, Dividend payout = 0.40, Sales to grow @ 10%. Estimate External Fund Requirement of the firm. What is the relevance of estimating External Fund Requirement? Explain how percentage of sales method can be used for estimation of External Fund Requirement.Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
- Answer the following lettered questions on the basis of the information in this table: a. If the interest-rate cost of funds is 8 percent, what will be the optimal amount of R&D spending for this firm?b. Explain why $20 million of R&D spending will not be optimal.c. Why won’t $60 million be optimal either?A firm has the following investment alternatives (refer to image): Each investment costs $3,000; investments B and C are mutually exclusive, and the firm’s cost of capital is 8 percent. a.) If the firm’s cost of capital had been 10 percent, what would be investment A’s internal rate of return? b.) The payback method of capital budgeting selects which investment?Why?Calculate the external financing needed given the following financial statements. Assume that all costs, all assets, and accounts payable change proportionally with sales. Sales are projected to grow by 25%. Also assume that the company is operating at full capacity. Current Statement of Comprehensive Income Sales $50,000 CoGS 30,000 EBDIT 20,000 Depreciation 10,000 EBIT 10,000 Interest expense 5,000 Taxable income 5,000 Taxes (35%) 1,750 Net Income 3,250 Dividends 975 Addition to RE 2,275 Current Statement of Financial Position Cash $8,000 Accounts receivable 22,000 Inventory 30,000 Total current assets 60,000 Fixed assets 90,000 Total assets $150,000 Accounts payable $15,000 Notes payable 5,000 Total current liabilities 20,000 Long-term debt 40,000 Common stock 40,000 Retained earnings 50,000 Total owners’ equity 90,000 Total Liabilities and OE $150,000 Select one answer A- $33,750 B- $34,656.25 C- $30,906.25 D- $37,500 E- $22,500
- A company wants to decide which project to undertake out of two projects A and B. For this purpose, it wants to evaluate each project that have the same initial investment (cost) but different cash flows for the next three years. The following table gives information on these two projects. The discount rate to be used is 8 percent, which is the WACC for the company. Use two methods of capital budgeting: The Net Present Value (NPV) Method and the Internal Rate of Return (IRR) Method, to evaluate and compare the two projects. Based on the outcome of calculations, choose the best project A or B and explain your decision for each method. Show all your work for each method step by step. Initial Investment and Cash Flows of Projects A and B in AED Project A Project B Initial Investment - 150,000 - 150,000 Year 1 Cash flow 20,000 50,000 Year 2 Cash flow 90,000 90,000 Year 3 Cash flow 70,000 60,000Suppose MMC Industries has calculated its external funds needed (EFN) to be $23,000,000, but now management is considering raising the previously assumed dividend payout ratio from 35% to 40%. If the payout ratio is increased, what will happen to EFN?Give only typing answer with explanation and conclusion to all parts Assume that Abiproffy has a $112.5 million capital budget planned for the coming year. You have determined its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution model approach to determine Abiproffy’s total dollar distribution. Assume for now that the distribution is in the form of a dividend. Abiproffy has 100 million shares. Answer the following questions. What is the forecasted dividend payout ratio? What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million? In general terms, how would a change in investment opportunities affect the payout ratio under the residual payment policy?