Self-Test Problems:1.Use the percentage of sales forecasting method to compute the additional financingneeded by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected toincrease from a current level of $20 million to a new level of $25 million over thecoming year. LSS expects earnings after taxes to equal $1 million over the nextyear. LSS intends to pay a $300,000 dividend next year. The current year balancesheet for LSS is as follows:Lambrechts Specialty Shops, Inc.Balance Sheet as of December 31, 20X3cash$1,000,000 Accounts payable$3,000,000Accounts receivable1,500,000 Notes payable3,000,000inventories6,000,000 Long-term debt2,000,000Net fixed assets3,000,000 Stockholders' equity3,500,00Total Assets$11,500,000 Total liabilities and equity$11,500,000All assets, except "cash", are expected to vary proportionately with sales. Of total liabilitiesand equity, only "accounts payable" is expected to vary proportionately with sales.

In this we need to calculate the increase in the sales and working capital and that would be the…

Oblems Use the percentage of sales forecasting method to compute the additional financing needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to increase from a current level of $20 million to a new level of $25 million over the coming year. LSS expects earnings after taxes to equal $1 million over the next year. LSS intends to pay a $300,000 dividend next year. The current year balance sheet for LSS is as follows:

Oblems Use the percentage of sales forecasting method to compute the additional financing needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to increase from a current level of $20 million to a new level of $25 million over the coming year. LSS expects earnings after taxes to equal $1 million over the next year. LSS intends to pay a $300,000 dividend next year. The current year balance sheet for LSS is as follows:

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter9: Projecting Financial Statements

Section: Chapter Questions

Problem 3EP

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