RETRO MACHINE, INC.Balance Sheet as of December 31, 2020AssetsLiabilities and Owners' EquityCurrent assetsCurrent liabilities$ 21,94044,880CashAccounts payableNotes payable$56,10015,300Accounts receivableInventory104,960Total$ 71,400Total$ 171,780 Long-term debt$ 143,000Fixed assetsOwners' equityCommon stock and paid-insurplusRetained earningsNet plant andequipment$436,000$ 121,000272,380Total$393,380Total liabilities and owners'equityTotal assets$ 607,780$ 607,780If the firm is operating at full capacity and no new debt or equity is issued, what is theexternal financing needed to support the 25 percent growth rate in sales? (Do not roundintermediate calculations.)EFN The most recent financial statements for Retro Machine, Inc., follow. Sales for 2021 areprojected to grow by 25 percent. Interest expense will remain constant; the tax rate andthe dividend payout rate will also remain constant. Costs, other expenses, currentassets, fixed assets, and accounts payable increase spontaneously with sales.RETRO MACHINE, INC.2020 Income StatementSalesCosts$760,000595,00031,000Other expensesEarnings before interestand taxesInterest paid$ 134,00027,000Taxable income$ 107,00023,540Taxes (22%)Net income$ 83,460Dividends$25,038Addition to retained58,422earnings

External financing is needed for growth and expansion of the firm.

Balance Sheet as of December 31, 2020 Assets Liabilities and Owners' Equity ent assets Current liabilities sh counts receivable $ 21,940 44,880 Accounts payable Notes payable $ 56,100 15,300 entory 104,960 Total $ 71,400 otal $ 171,780 Long-term debt $ 143,000 d assets t plant and Owners' equity Common stock and paid-in $436,000 $ 121,000 oment

Balance Sheet as of December 31, 2020 Assets Liabilities and Owners' Equity ent assets Current liabilities sh counts receivable $ 21,940 44,880 Accounts payable Notes payable $ 56,100 15,300 entory 104,960 Total $ 71,400 otal $ 171,780 Long-term debt $ 143,000 d assets t plant and Owners' equity Common stock and paid-in $436,000 $ 121,000 oment

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter16: Financial Planning And Forecasting

Section: Chapter Questions

Problem 8P: LONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were 1.8 million and...

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LONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were 1.8 million and accounts payable were 450,000. Sales, which in 2019 were 3.0 million, are expected to increase by 25% in 2020. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to 500,000 in 2019, and retained earnings were 475,000. Arrington plans to sell new common stock in the amount of 130,000. The firms profit margin on sates is 5%; 35% of earnings will be retained. a. What were Arringtons total liabilities in 2019? b. How much new long-term debt financing will be needed in 2020? (Hint: AFN - New stock = New long-term debt.)
Smiley Corporations current sales and partial balance sheet are shown here. Sales are expected to grow by 10% next year. Assuming no change in operations from this year to next year, what are the projected spontaneous liabilities?
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.)
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.)
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)
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Assume that today is December 31, 2018, and that the following information applies to Abner Airlines: After-tax operating income [EBIT(1 - T)] for 2019 is expected to be $500 million. The depreciation expense for 2019 is expected to be $180 million. The capital expenditures for 2019 are expected to be $400 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 6% per year. The required return on equity is 15%. The WACC is 10%. The firm has $200 million of non-operating assets. The market value of the company's debt is $3.096 billion. 340 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent. $
ssume that today is December 31, 2018, and that the following information applies to Abner Airlines: After-tax operating income [EBIT(1 - T)] for 2019 is expected to be $500 million. The depreciation expense for 2019 is expected to be $180 million. The capital expenditures for 2019 are expected to be $400 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 6% per year. The required return on equity is 15%. The WACC is 10%. The firm has $200 million of non-operating assets. The market value of the company's debt is $3.096 billion. 340 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent. $