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Question;1. Additional;Funds Needed;The Booth Company's sales are forecasted to double from;$1,000 in 2012 to $2,000 in 2013. Here is the December 31, 2012, balance sheet;Cash $ 100 Accounts payable $ 50;Accounts receivable 200 Notes payable 150;Inventories 200 Accruals 50;Net fixed assets 500 Long-term debt 400;Common stock 100;Retained earnings 250;Total assets $1000 Total liabilities and equity $1000;Booth's fixed assets were used to only 50% of capacity;during 2012, but its current assets were at their proper levels in relation to;sales. Spontaneous liabilities and all assets except fixed assets must increase;at the same rate as sales, and fixed assets would also have to increase at the;same rate if the current excess capacity did not exist. Booth's after-tax;profit margin is forecasted to be 7% and its payout ratio to be 70%. What is;Booth's additional funds needed (AFN) for the coming year? Round your answer to;the nearest dollar.$;2. AFN equation;Broussard Skateboard's sales are expected to increase by 15%;from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $5 million;at the end of 2013. Broussard is already at full capacity, so its assets must;grow at the same rate as projected sales. At the end of 2013, current;liabilities were $1.4 million, consisting of $450,000 of accounts payable;$500,000 of notes payable, and $450,000 of accruals. The after-tax profit;margin is forecasted to be 6%, and the forecasted payout ratio is 55%. What;would be the additional funds needed? Do not round intermediate calculations.;Round your answer to the nearest dollar.$;Assume that the company's year-end 2013 assets had been $4;million. Is the company's "capital intensity" ratio the same or;different?;I. The capital intensity ratio is measured as A0*/S0.;Broussard's capital intensity ratio is lower than that of the firm with $4;million year-end 2013 assets, therefore, Broussard is more capital intensive -;it would require a smaller increase in total assets to support the increase in;sales.;II. The capital intensity ratio is measured as A0*/S0.;Broussard's capital intensity ratio is higher than that of the firm with $4;million year-end 2013 assets, therefore, Broussard is less capital intensive -;it would require a smaller increase in total assets to support the increase in;sales.;III. The capital intensity ratio is measured as A0*/S0.;Broussard's capital intensity ratio is higher than that of the firm with $4;million year-end 2013 assets, therefore, Broussard is more capital intensive -;it would require a larger increase in total assets to support the increase in;sales.;IV. The capital intensity ratio is measured as A0*/S0.;Broussard's capital intensity ratio is lower than that of the firm with $4;million year-end 2013 assets, therefore, Broussard is more capital intensive -;it would require a larger increase in total assets to support the increase in;sales.;3.;AFN Equation Broussard Skateboard's sales are expected to;increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets;totaled $4 million at the end of 2013. Baxter is already at full capacity, so;its assets must grow at the same rate as projected sales. At the end of 2013;current liabilities were $1.4 million, consisting of $450,000 of accounts;payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax;profit margin is forecasted to be 4%. Assume that the company pays no;dividends. Under these assumptions, what would be the additional funds needed;for the coming year? Do not round intermediate calculations. Round your answer;to the nearest dollar.;$;Why is this AFN different from the one when the company pays;dividends?;I. Under this scenario the company would have a lower level;of retained earnings which would reduce the amount of additional funds needed.;II. Under this scenario the company would have a lower level;of retained earnings but this would have no effect on the amount of additional;funds needed.;III. Under this scenario the company would have a higher;level of retained earnings which would reduce the amount of additional funds;needed.;IV. Under this scenario the company would have a higher;level of retained earnings which would increase the amount of additional funds;needed.;V. Under this scenario the company would have a higher level;of retained earnings but this would have no effect on the amount of additional;funds needed.;4.Sales Increase;Maggie's Muffins, Inc., generated $4,000,000 in sales during;2013, and its year-end total assets were $2,400,000. Also, at year-end 2013;current liabilities were $1,000,000, consisting of $300,000 of notes payable;$500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2014;the company estimates that its assets must increase at the same rate as sales;its spontaneous liabilities will increase at the same rate as sales, its profit;margin will be 4%, and its payout ratio will be 70%. How large a sales increase;can the company achieve without having to raise funds externally, that is, what;is its self-supporting growth rate? Do not round intermediate steps. Round your;answers to the nearest whole.;Sales can increase by $, that is by %.;5.;Long-Term Financing Needed;At year-end 2013, Wallace Landscaping?s total assets were $1.8;million and its accounts payable were $415,000. Sales, which in 2013 were $2.6;million, are expected to increase by 30% in 2014. Total assets and accounts;payable are proportional to sales, and that relationship will be maintained.;Wallace typically uses no current liabilities other than accounts payable.;Common stock amounted to $470,000 in 2013, and retained earnings were $345,000.;Wallace has arranged to sell $50,000 of new common stock in 2014 to meet some;of its financing needs. The remainder of its financing needs will be met by;issuing new long-term debt at the end of 2014. (Because the debt is added at;the end of the year, there will be no additional interest expense due to the;new debt.) Its profit margin on sales is 4%, and 35% of earnings will be paid;out as dividends.;1. What was;Wallace's total long-term debt in 2013? Round your answer to the nearest;dollar.;$;What were Wallace's total liabilities in 2013? Round your;answer to the nearest dollar.;$;2. How much;new long-term debt financing will be needed in 2014? (Hint: AFN - New stock =;New long-term debt.) Round your answer to the nearest dollar.;$;6.Additional Funds Needed;The Booth Company's sales are forecasted to double from;$1,000 in 2012 to $2,000 in 2013. Here is the December 31, 2012, balance sheet;Cash $ 100 Accounts payable $ 50;Accounts receivable 200 Notes payable 150;Inventories 200 Accruals 50;Net fixed assets 500 Long-term debt 400;Common stock 100;Retained earnings 250;Total assets $1000 Total liabilities and equity $1000;Booth's fixed assets were used to only 50% of capacity;during 2012, but its current assets were at their proper levels in relation to;sales. Spontaneous liabilities and all assets except fixed assets must increase;at the same rate as sales, and fixed assets would also have to increase at the;same rate if the current excess capacity did not exist. Booth's after-tax;profit margin is forecasted to be 7% and its payout ratio to be 70%. What is;Booth's additional funds needed (AFN) for the coming year? Round your answer to;the nearest dollar.

 

Paper#41259 | Written in 18-Jul-2015

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