DEVCON INDUSTRIES LIMITEDIncome StatementFor the years ended Dec. 31, 2018 and201920182019so00'ss000'sSales9000001125000Cost of Goods Sold300000306600Gross Profit600000818400Selling and Administrative Expenses150000156000Depreciation Expense5400057000Advertising Expenses1800021000Earnings Before Interest and Taxes378000584400Interest Expense30003000Taxable Income375000581400Taxation (35%)131250203490Net Income243750377910Dividends (40%)97500151164Addition to Retained Earnings146250226746Additional InformationShare Price2127.3Ordinary Shares Outstanding120000000144000000DEVCON INDUSTRIESLIMITEDStatement of FinancialPositionAs at Dec. 31, 2018 and 2019ASSETS20182019LIABILITIES & EQUITY20182019Current Assetss00'ss000'sCurrent Liabilitiesso00'sSo00'sInventories264000276000Accounts PayablesNotes Payables138000114000Accounts Receivables294000330000150900132654Cash and Equivalents210900270000288900246654768900876000Non-current Liabilities12000090000Total Liabilities408900336654Net Fixed Assets630600690000EquityCommon Stock264000276000Retained Earnings726600953346Total Equity9906001229346Total Assets13995001566000Total Liabilities & Equity13995001566000 In addition to the projects evaluated above, DEVCON Industries isconsidering several other savings and financing options in an effortto expand operations and improve overall efficiency of operations,while fully investing idle cash.(a) Based on Statement of Financial Position as at December 31, 2019,the Company had$270,000,000 is Cash & Equivalents. Of this, $20,000,000 was ina fixed deposit that is due to mature on December 1, 2020. Thecompany is considering the following investment options forthese funds:Investment Alphacompounded semi-annually Investment BetaAnnual Interest Rate of 8.25%, compounded monthlyAnnual Interest Rate of 8.5%,Investment GammaAnnual Interest Rate of7.96%, compounded dailyRequired:i. Advise the company on the best investment option for thematuring funds.ii. Based on your choice from part (i), if DEVCON Industries investsthe lump sum of$20,000,000 on December 2, 2020 and leaves it in the accountfor 4 years, what will be the value of the investment onDecember 1, 2024?

Future Value: It represents the future worth of the present amount of investment and is estimated…

i. Advise the company on the best investment option for the maturing funds. ii. Based on your choice from part (i), if DEVCON Industries invests the lump sum of $20,000,000 on December 2, 2020 and leaves it in the account for 4 years, what will be the value of the investment on December 1, 2024?

i. Advise the company on the best investment option for the maturing funds. ii. Based on your choice from part (i), if DEVCON Industries invests the lump sum of $20,000,000 on December 2, 2020 and leaves it in the account for 4 years, what will be the value of the investment on December 1, 2024?

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 13P: ADDITIONAL FUNDS NEEDED Morrissey Technologies Inc.s 2019 financial statements are shown here....

See similar textbooks

Similar questions

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.)
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?
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?
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.)
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.)
In addition to the projects evaluated above, Micron Industries is considering several other savings and financing options in an effort to expand operations and improve overall efficiency of operations, while fully investing idle cash. (a) Based on Statement of Financial Position as at December 31, 2019, the Company had $270,000,000 is Cash & Equivalents. Of this, $20,000,000 was in a fixed deposit that is due to mature on December 1, 2020. The company is considering the following investment options for these funds: Investment Alpha Annual Interest Rate of 8.5%, compounded semi annually Investment Beta Annual Interest Rate of 8.25%, compounded monthly Investment Gamma Annual Interest Rate of 7.96%, compounded daily Required: i. Advise the company on the best investment option for the maturing funds. ii. Based on your choice from part (i), if Micron Industries invests the lump sum of $20,000,000 on December 2, 2020 and leaves it in the account for 4 years, what will be the value of…
Swifty Corp. has decided to expand its operations. The bookkeeper recently completed the following statement of financial position in order to obtain additional funds for expansion: SWIFTY CORP.Statement of Financial PositionFor the Year Ended December 31, 2020 Current assets Cash (net of bank overdraft of $35,000) $ 290,000 Accounts receivable (net) 510,000 Inventory at the lower of cost and net realizable value 551,000 FV-NI investments (at cost—fair value $180,000) 150,000 Property, plant, and equipment Buildings (net) 720,000 Equipment (net) 180,000 Land held for future use 335,000 Intangible assets Goodwill 90,000 Investment in bonds to collect cash flows, at amortized cost 97,000 Prepaid expenses 22,000 Current liabilities Accounts payable 225,000 Notes payable (due next year) 295,000…
You have been asked to review the December 31, 2021, balance sheet for Champion Cleaning. After completing your review, you list the following three items for discussion with your superior: An investment of $44,000 is included in current assets. Management has indicated that it has no intention of liquidating the investment in 2022. A $240,000 note payable is listed as a long-term liability, but you have determined that the note is due in 10, equal annual installments with the first installment due on March 31, 2022. Deferred revenue of $102,000 is included as a current liability even though only two-thirds will be recognized as revenue in 2022, and the other one-third in 2023. Determine the appropriate classification of each of these items. (If no entry is required for classification, choose "No entry".)
Hampton Industries had $66,000 in cash at year-end 2020 and $18,000 in cash at year-end 2021. The firm invested in property, plant, and equipment totaling $140,000 — the majority having a useful life greater than 20 years and falling under the alternative depreciation system. Cash flow from financing activities totaled +$220,000. Round your answers to the nearest dollar, if necessary. What was the cash flow from operating activities? Cash outflow, if any, should be indicated by a minus sign. $ If accruals increased by $15,000, receivables and inventories increased by $160,000, and depreciation and amortization totaled $15,000, what was the firm's net income?
Presented below is selected information pertaining to the Cassie Inc:Cash balance, January 1, 2020- P13,000Accounts receivable, January 1, 2020- P19,000Collections from customers in 2020- P210,000 Capital account balance, January 1, 2020- P38,000Total assets, January 1, 2020- P75,000Cash investment added, July 1, 2020-P5,000Total asset, December 31, 2020- P101,000 Cash balance, December 31, 2020- P20,000Accounts receivable, December 31, 2020- P36,000Merchandise taken for personal use during 2020- P11,000Total liabilities, December 31, 2020- P41,000How much is the net income for 2020?
For 2019, Nirvana Industries disclosed cash revenue of $12.0 million and cash expenses of $6.0 million, depreciation on plant and equipment of $2.0million and an effective tax rate of 21%. For 2019, Nirvana Industries had capital expenditures of $1.0 million to purchase manufacturing equipment and invested $850,000 in net working capital. What were the net (total) cash flows for Nirvana Industries in 2019? Round your answer to the nearest hundredth of million $
For 2019, Nirvana Industries disclosed cash revenue of $11.0 million and cash expenses of $6.0 million, depreciation on plant and equipment of $2.5 million and an effective tax rate of 21%. For 2019, Nirvana Industries had capital expenditures of $1.0 million to purchase manufacturing equipment and invested $850,000 in net working capital. What were the net (total) cash flows for Nirvana Industries in 2019? Round your answer to the nearest hundredth of million $