Additional Funds Needed The Booth Company's sales are forecasted to double from $1,000 in 2019 to $2,000 in 2020. Here is the December 31, 2019, balance sheet: Cash Accounts receivable Inventories Net fixed assets $100 200 200 500 Accounts payable Notes payable Accruals Long-term debt Common stock Retained earnings Total liabilities and equity $ 50 150 50 400 100 250 $1,000 Total assets $1,000 Booth's fixed assets were used to only 50% of capacity during 2019, but its current assets were at their proper levels in relation to sales. 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 5% and its payout ratio to be 50%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar. $

Additional Funds Needed The Booth Company's sales are forecasted to double from $1,000 in 2019 to $2,000 in 2020. Here is the December 31, 2019, balance sheet: Cash Accounts receivable Inventories Net fixed assets $100 200 200 500 Accounts payable Notes payable Accruals Long-term debt Common stock Retained earnings Total liabilities and equity $ 50 150 50 400 100 250 $1,000 Total assets $1,000 Booth's fixed assets were used to only 50% of capacity during 2019, but its current assets were at their proper levels in relation to sales. 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 5% and its payout ratio to be 50%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar. $

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter9: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 6P: Additional Funds Needed The Booth Company’s sales are forecasted to double from $1,000 in 2018 to...

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ADDITIONAL FUNDS NEEDED Morrissey Technologies Inc.s 2019 financial statements are shown here. Morrissey Technologies Inc.: Balance Sheet as of December 31, 2019 Morrissey Technologies Inc.: Income Statement for December 31, 2019 Suppose that in 2020, sales increase by 10% over 2019 sales. The firm currently has 100,000 shares outstanding. It expects to maintain its 2019 dividend payout ratio and believes that its assets should grow at the same rate as sales. The firm has no excess capacity. However, the firm would like to reduce its operating costs/sales ratio to 87.5% and increase its total liabilities-to-assets ratio to 30%. (It believes its liabilities-to-assets ratio currently is too low relative to the industry average.) The firm will raise 30% of the 2020 forecasted interest-bearing debt as notes payable, and it will issue long-term bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short- and long-term debt) is 12.5%. Assume that any common stock issuances or repurchases can be made at the firms current stock price of 45. a. Construct the forecasted financial statements assuming that these changes are made. What are the firms forecasted notes payable and long-term debt balances? What is the forecasted addition to retained earnings? b. If the profit margin remains at 6.25% and the dividend payout ratio remains at 60%, at what growth rate in sales will the additional financing requirements be exactly zero? In other words, what is the firms sustainable growth rate? (Hint: Set AFN equal to zero and solve for g.)
Additional Funds Needed The Booth Company’s sales are forecasted to double from $1,000 in 2018 to $2,000 in 2019. Here is the December 31, 2018, balance sheet: Booth’s fixed assets were used to only 50% of capacity during 2018, but its current assets were at their proper levels in relation to sales. 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 5% and its payout ratio to be 60%. What is Booth’s additional funds needed (AFN) for the coming year?
If 90,000 is invested in a fund on December 31, 2019, and 5 equal annual withdrawals of 23,138.32 are made starting on December 31, 2020, that will deplete the fund, what is the interest rate being earned if interest is compounded annually?
AFN EQUATION Refer to Problem 16-1 and assume that the company had 3 million in assets at the end of 2019. However, now assume that the company pays no dividends. Under these assumptions, what additional funds would be needed for the coming year? Why is this AFN different from the one you found in Problem 16-1?
Long-Term Financing Needed At year-end 2018, Wallace Landscapings total assets were 2.17 million, and its accounts payable were 560,000. Sales, which in 2018 were 3.5 million, are expected to increase by 35% in 2019. 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 625,000 in 2018, and retained earnings were 395,000. Wallace has arranged to sell 195,000 of new common stock in 2019 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 2019. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 5%, and 45% of earnings will be paid out as dividends. a. What were Wallaces total long-term debt and total liabilities in 2018? b. How much new long-term debt financing will be needed in 2019? [Hint: AFN New stock = New long-term debt.)
Financing Deficit Stevens Textile Corporation’s 2018 financial statements are shown here: Balance Sheet as of December 31, 2018 (Thousands of Dollars) Income Statement for December 31, 2018 (Thousands of Dollars) Suppose 2019 sales are projected to increase by 15% over 2018 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2019. The interest rate on all debt is 10%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2018, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. What is the resulting total forecasted amount of the line of credit? In your answers to parts a and b, you should not have charged any interest on the additional debt added during 2019 because it was assumed that the new debt was added at the end of the year. But now suppose that the new debt is added throughout the year. Don’t do any calculations, but how would this change the answers to parts a and b?
Stevens Textile Corporations 2019 financial statements are shown here. Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to grow by 15% in the next year but will finance the growth with a line of credit, not notes payable or long-term bonds. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2020. The interest rate on all debt is 10%, and cash earns no interest income. The line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2019, that it cannot sell off any of its fixed assets, and that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. a. What is the projected value for earnings before interest and taxes? b. What is the projected value for pre-tax earnings? c. What is the projected net income? d. What is the projected addition to retained earnings? e. What is the projected value of total current assets? f. What is the projected value of total assets? g. What is the projected sum of accounts payable, accruals, and notes payable? h. What is the forecasted line of credit? Balance Sheet as of December 31, 2019 (Thousands of Dollars) Income Statement for December 31, 2019 (Thousands of Dollars)
Short-Term Debt Expected to Be Refinanced On December 31, 2019, Excello Electric Company had 1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a long-term basis. On January 15, 2020, the company issued bonds with a face value of 900,000 for 882,000. On January 22, 2020, the proceeds from the bond issue plus additional cash held by Excello on December 31, 2019, were used to liquidate the 1 million of short-term notes. The December 31, 2019, balance sheet is issued on February 12, 2020. Required: Prepare a partial balance sheet as of December 31, 2019, showing how the 1 million of short-term notes payable should be disclosed. Include an appropriate footnote for proper disclosure.
AFN EQUATION Refer to Problem 16-1. What additional funds would be needed if the companys year-end 2019 assets had been 4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in Problem 16-1? Is the companys capital intensity the same or different? Explain.
Leverage Cook Corporation issued financial statements at December 31, 2019, that include the following information: Balance sheet at December 31,2019 Assets $8,000,000 Liabilities $1,200,000 Stockholders' equity (300,000 shares) $6,800,000 Income statement for 2019: Income from operations $1,200,000 Less: Interest expense (100,000) Income before taxes $1,100,000 Less: Income taxes expense (0,30) (330,000) Net income $ 770,000 The levels of assets, liabilities, stockholders' equity, and operating income have been stable in recent years; however, Cook Corporation is planning a 51,800,000 expansion program that will increase income from operations by $350,000 to $1,550,000, Cook is planning to sell 8.5% notes at par to finance the expansion. Required: What earnings per share does Cook report before the expansion?