At year-end 2018, Wallace Landscaping's total assets were $2.17 million, and its accounts payable were $470,000. Sales, which in 2018 were $2.2 million, are expected to increase by 30% 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 $505,000 in 2018, and retained earnings were $345,000. Wallace has arranged to sell $60,000 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 7%, and 45% of earnings will be paid out as dividends. a. What was Wallace's total long-term debt in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What were Wallace's total liabilities in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar. $ b. How much new long-term debt financing will be needed in 2019? (Hint: AFN - New stock = New long-term debt.) Do not round intermediate calculations. Round your answer to the nearest dollar. $
At year-end 2018, Wallace Landscaping's total assets were $2.17 million, and its accounts payable were $470,000. Sales, which in 2018 were $2.2 million, are expected to increase by 30% 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 $505,000 in 2018, and retained earnings were $345,000. Wallace has arranged to sell $60,000 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 7%, and 45% of earnings will be paid out as dividends. a. What was Wallace's total long-term debt in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What were Wallace's total liabilities in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar. $ b. How much new long-term debt financing will be needed in 2019? (Hint: AFN - New stock = New long-term debt.) Do not round intermediate calculations. 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 5P: Long-Term Financing Needed At year-end 2018, Wallace Landscapings total assets were 2.17 million,...
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Transcribed Image Text:At year-end 2018, Wallace Landscaping's total assets were $2.17 million, and its accounts payable were $470,000. Sales, which in 2018 were $2.2 million, are expected to increase by 30% 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 $505,000 in 2018, and retained earnings were $345,000. Wallace has
arranged to sell $60,000 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 7%, and 45% of earnings will be paid out as dividends.
a. What was Wallace's total long-term debt in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar.
$
What were Wallace's total liabilities in 2018? Do not round intermediate calculations. Round your answer to the nearest dollar.
$
b. How much new long-term debt financing will be needed in 2019? (Hint: AFN - New stock = New long-term debt.) Do not round intermediate calculations. Round your answer to the nearest dollar.
$
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