Cordell, Inc., has an operating leverage of 3. Sales are expected to increase by 9% next year. What is the expected change in operating income next year?
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- Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?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?Suppose the company has just the opposite news and now expects unit sales for August, September, and October to be double (200%) the original estimates. What effect will this have on the company’s net income and borrowing? Explain your findings.
- Cordell, Inc., has an operating leverage of 3. Sales are expected to increase by 9% next year. What is the expected change in operating income next year?fill in the blank 1 % Increase or Decrease?Bl Inc currently has earnings before interest and taxes of P3,000,000, a degree of combined leverage of 8, and a degree of financial leverage of 2. What will be the expected earnings before interest and taxes in one year if sales decrease by 20% next year?Finlay Corporation had sales this year of $3,270 million, and sales are expected to grow by 20 percent next year. Next year the company expects cost of goods sold to be 60 percent of sales, selling expenses to be $40 million per month, depreciation to be $10 million per month, and interest expense to be $24 million per month. Taxes are computed at 21 percent. What is Finlay's expected net income next year?
- If sales increase from P80.000 per year to P140,000 per year, and if the operating leverage factor is 5, then net operating income should increase by:Mendel Incorporated has an operating leverage of 3.8. If the company's sales increase by 10%, its net operating income should increase by about:Lux Co. recently reported sales of P100 million, and net income equal to P5 million. The company has P70 million in total assets. Over the next year, the company is forecasting a 25 percent increase in sales. Since the company is at full capacity, its assets must increase in proportion to sales. The company also estimates that if sales increase 20 percent, spontaneous liabilities will increase by P2.1 million. If the company’s sales increase, its profit margin will remain at its current level. The company’s dividend payout ratio is 45 percent. Based on the AFN formula, how much additional capital must the company raise in order to support the 20 percent increase in sales?
- Bulldogs Inc. recently reported net income of P5,000,0000. The firm has P40,000,000 total assets. Next year, National Inc. is forecasting a 20% increase in sales. The firm also estimates that if sales increase by 20%, spontaneous liabilities will increase by P950,000. The retention ratio is maintained at 75%. If the sales increase, the profit margin will remain at its current level. The company is operating at full capacity. How much is the increase in retained earnings that will contribute to cover the increase in asset? A. 4,500,000 B. 36,000,000 C. 750,000 D. 3,750,000Bulldogs Inc. recently reported net income of P5,000,0000. The firm has P40,000,000 total assets. Next year, National Inc. is forecasting a 20% increase in sales. The firm also estimates that if sales increase by 20%, spontaneous liabilities will increase by P950,000. The retention ratio is maintained at 75%. If the sales increase, the profit margin will remain at its current level. The company is operating at full capacity. How much is the increase in retained earnings that will contribute to cover the increase in asset? 4,500,000 3,750,000 750,000 36,000,000The Prentice Paint Company earned a Net Profit margin of 20% on revenues of $20million this year. Fixed Capital Investment was $2 million and the depreciation was $3 million. Working capital investment equals 7.5% of the sales level in that year. Net Income, Fixed Capital Investment, depreciation, interest expense, and sales are expected are expected to grow at 10% per year for the next 5 years. After 5 years, the growth rate in sales, net income, and interest expense will decline to a stable 5% per year, and fixed capital investment and depreciation will offset each other. The tax rate is 40%, it has 1 million shares of common stock outstanding, and has long-term debt paying 12.5% interest trading at its par value of $32 million. Calculate the value of the firm and its equity using the FCFF model if the WACC is 17% during the high growth stage and 15% during the stable stage.
