None Suppose that Wall-E Corporation currently has the balance sheet shown below, and that sales for the year just ended were $7.9million. The firm also has a profit margin of 25 percent and a retention ratio of 30 percent and expects sales of $9.9 million next year.Fixed assets are currently fully utilized, and the nature of Wall-E's fixed assets is such that they must be added in $1 million increments.AssetsCurrent assetsFixed assets$ 2,844,0005,214,000Liabilities and EquityCurrent liabilities$ 2,133,000Long-term debtEquity1,950,0003,975,000$ 8,058,000Total assets $ 8,058,000 Total liabilities and equityIf current assets and current liabilities are expected to grow with sales, what amount of additional funds will Wall-E need from externalsources to fund the expected growth?Note: Enter your answer in dollars not in millions. Round your answer to the nearest whole dollar.Additional funds needed

Increase in current assets=2844000*((9900000-7900000)/7900000)=720000 Increase in fixed…

Answered: Suppose that Wall-E Corporation…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

(a) Assume JPM has a Liquidity Coverage Ratio of 112%. Assume JPM's High Quality Liquid Assets total $750 billion, what is JPM's 30-day net cash outflow? What is JPM's 30-day net cash outflow? (b) At year - end, 2022, JPM total assets $3, 665,743, 000, 000 ($3.665 trillion). What fraction of total assets are risk - weighted?
The average total assets of Party Favors, Inc. amount to $110,000. The firm's total receivables are $7,000, representing 25 days' sales. The firm's profit margin is 8 percent. Use a 365-day year and round your answers to two decimals. A) What is Party Favor's asset turnover ratio? B) What is its ROA?
Suppose that Wind Em Corp. currently has the balance sheet shown below, and that sales for the year just ended were $7 million. The firm also has a profit margin of 27 percent, a retention ratio of 20 percent, and expects sales of $8 million next year. Assets Current assets Fixed assets Total assets Liabilities and Equity Additional funds needed $2,000,000 Current liabilities Long-term debt 5,000,000 Equity $7,000,000 Total liabilities and equity $2,500,000 1,500,000 3,000,000 $7,000,000 If all assets and current liabilities are expected to grow with sales, what amount of additional funds will Wind Em need from external sources to fund the expected growth? (Enter your answer in dollars not in millions.)
Use the following information for numbers 23 to 25: Corporate Valuators, Inc. is assessing the value of two companies, Capital Corp. and Earm, Inc. which projects the following net cash flows in the next five years, with its desired required rate of return. Net cash flows approximate to be its earnings also. The balance sheet of Capital Corp. and Eam, Inc. has recorded Property, Plant and Equipment of P100 million and P200 million, respectively. Operating assets are estimated at 80% and 70% respectively and the rest are considered idle. Capital Corp. 8,000,000 8,800,000 9,680,000 10,648,000 11,712,800 Required return 8% Net cash flows Net cash flows Earn, Inc. 9,600,000 10,560,000 11,616,000 12,777,000 14,055,3 6% Year 1 2 3 4 23. Using capitalization of earnings, compute for the equity value of Capital Corp. 24. Using capitalization of earnings, compute for the equity value of Eam, Inc. 25. Which company has higher equity value?
The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $270,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $70 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019(Figures in $ thousands) Revenue $ 1,800 Fixed costs 70 Variable costs (70% of revenue) 1,260 Depreciation 216 Interest (6% of beginning-of-year debt) 18 Taxable income 236 Taxes (at 35%) 83 Net income $ 153 Dividends $ 77 Addition to retained…
The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $90 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019(Figures in $ thousands) Revenue $ 1,800 Fixed costs 90 Variable costs (70% of revenue) 1,260 Depreciation 160 Interest (6% of beginning-of-year debt) 18 Taxable income 272 Taxes (at 35%) 95 Net income $ 177 Dividends $ 89 Addition to retained…
Water and Power Co. (W&P) currently has $575,000 in total assets and sales of $1,400,000. Half of W&P’s total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 22% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is . (Note: Round your answer to the nearest whole number.) W&P was using its fixed assets at only 95% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets? (Note: Round your answer to the nearest whole number.) $1,547,368 $1,768,421 $1,473,684 $1,694,737 When you consider that W&P’s fixed assets were being underused, its target fixed assets to sales ratio should be %. (Note: Round your answer to two decimal places.) When you consider that W&P’s fixed assets were being underused, how much fixed assets must W&P raise to…
The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $270,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $70 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019(Figures in $ thousands) Revenue $ 1,800 Fixed costs 70 Variable costs (70% of revenue) 1,260 Depreciation 216 Interest (6% of beginning-of-year debt) 18 Taxable income 236 Taxes (at 35%) 83 Net income $ 153 Dividends $ 77 Addition to retained…
Suppose that Barone Corporation's sales are expected to increase from $5 million this year (year 0) to $6 million next year (year 1). Its assets totaled $2,500,000 in year 0. Barone is at full capacity, so its assets must grow in proportion to projected sales. At the end of year 0, current liabilities are $800,000, consisting of $200,000 of accounts payable, $400,000 of notes payable, and $200,000 of accrued liabilities. Barone's profit margin is forecasted to be 3.00% and the forecasted retention ratio is 25.00%. Barone seeks to forecast the additional funds needed using the AFN equation. Let A represent Barone's assets and So represent sales in year 0. Let AS represent the change in sales in from year 0 to year 1. According to the video, which of the following best represents the projected increase in assets as part of the AFN equation? -AS + AS × AS × So Using the formula from the video, the projected increase in assets, as part of the AFN equation, is
Samad, a Finance Manager, is attempting to forecast next year's income statement and balance sheet. Current sales are RM565,000 and are expected to increase 15% next year. The majority of the firm's operating expenses are expected to increase too. The depreciation expense is expected to be RM135,400. The planned purchase of new equipment is expected to cost RM287,000. Currently the firm has total net fixed assets of RM847,000. What will be the value of net fixed assets in the forecasted year? Select one: a. RM998,600 b. RM847,000 c. RM287,000 d. RM1,134,000
The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for the next 5 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 10% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $60 and variable costs at 80% of revenue. The company's policy is to pay out two- thirds of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019 (Figures in $ thousands) Revenue $1,800 Fixed costs Variable costs (80% of revenue) Depreciation Interest (8% of beginning-of-year debt) Taxable income Taxes (at 40%) 60 1,440 80 24 196 78 Net income 118 Dividends Addition to retained earnings $ 79 $ 39 BALANCE SHEET, YEAR-END (Figures in $ thousands) 2019 Assets Net working capital Fixed assets…
The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for the next 5 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 10% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $60 and variable costs at 80% of revenue. The company’s policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019(Figures in $ thousands) Revenue $ 1,800 Fixed costs 60 Variable costs (80% of revenue) 1,440 Depreciation 80 Interest (8% of beginning-of-year debt) 24 Taxable income 196 Taxes (at 40%) 78 Net income $ 118 Dividends $ 79 Addition to…

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS