Bundle: Financial Management: Theory and Practice, Loose-leaf Version, 15th + Aplia, 1 term Printed Access Card
Bundle: Financial Management: Theory and Practice, Loose-leaf Version, 15th + Aplia, 1 term Printed Access Card
15th Edition
ISBN: 9781337130295
Author: Eugene F. Brigham, Michael C. Ehrhardt
Publisher: Cengage Learning
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Chapter 12, Problem 6P
Summary Introduction

To compute: The additional fund required for the next year.

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Krogh Lumber's 2019 financial statements are shown here. a.  Assume that the company was operating at full capacity in 2019 with regard to all items except fixed assets; fixed assets in 2019 were being utilized to only 75% of capacity. By what percentage could 2020 sales increase over 2019 sales without the need for an increase in fixed assets?b.  Now suppose 2020 sales increase by 25% over 2019 sales. Assume that Krogh cannot sell any fixed assets. All assets other than fixed assets will grow at the same rate as sales; however, after reviewing industry averages, the firm would like to reduce its operating  costs/sales ratio  to  82% and  increase its total liabilities-to-assets ratio  to 42%. The firm will maintain its 60% dividend payout ratio, and it currently has 1 million shares outstanding. The firm plans to raise 35% of its 2020 forecasted inter­ est-bearing debt as notes payable, and it will issue bonds for the remainder. The firm forecasts that its before-tax cost of debt…
Beasley Industries' sales are expected to increase from $5 million in 2017 to $6 million in 2018, or by 20%. Its assets totaled $3 million at the end of 2017. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2017, current liabilities are $780,000, consisting of $120,000 of accounts payable, $500,000 of notes payable, and $160,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and its dividend payout ratio is 60%. Using the AFN equation, forecast the additional funds Beasley will need for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.
The average price of a gallon of gas in 2015 dropped $0.94 (28 percent) from $3.34 in 2014 (to $2.40 in 2015). Let’s see whether these changes are reflected in the income statement of Insignia Corporation for the year ended December 31, 2015 (amounts in billions). Insignia reported average net fixed assets of $190 billion in 2015 and $146 billion in 2014. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2015 or 2014? Insignia reported average stockholders’ equity of $180 billion in 2015 and $146 billion in 2014. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2015 or 2014?
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