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EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 9781260049237
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 18, Problem 8QP
a)
Summary Introduction
To compute: The asset’s implied level.
b)
Summary Introduction
To compute: The amount of cash required to raise in capital market.
c)
Summary Introduction
To compute: The ratio of debt.
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Students have asked these similar questions
The following tables summarize the 2022 income statement and end-year balance sheet of Drake's Bowling Alleys. Drake's financial
manager forecasts a 20% increase in sales and costs in 2023. The ratio of sales to average assets is expected to remain at 0.50.
Interest is forecasted at 4% of debt at the start of the year.
Sales
Costs
Interest
Pretax profit
Tax
Net income
INCOME STATEMENT, 2022
(Figures in $ thousands)
$ 1,750
1,050
(50% of average assets) a
(60% of sales)
(4% of debt at start of year) b
24
$ 676
203
$ 473
(30% of pretax profit)
a
b
Assets at the end of 2021 were $3,400,000.
Debt at the end of 2021 was $600,000.
Assets
Total
BALANCE SHEET, YEAR-END 2022
(Figures in $ thousands)
$ 3,600
$ 3,600
Debt
Equity
$ 600
3,000
$ 3,600
a. What the implied level of assets at the end of 2023?
Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands.
b. If the company pays out 50% of net income as dividends, how much cash will Drake's…
The table given below summarizes the 2019 income statement and end-year balance sheet of Drake’s Bowling Alleys. Drake’s financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 5% of debt at the start of the year.
Income Statement
$ in thousands
Sales
$
2,600
(40% of average assets)a
Costs
1,950
(75% of sales)
Interest
105
(5% of debt at start of year)b
Pretax profit
545
Tax
218
(40% of pretax profit)
Net income
$
327
aAssets at the end of 2018 were $6,240,000.
bDebt at the end of 2018 was $2,100,000.
Balance Sheet
$ in thousands
Net assets
$
6,760
Debt
$
2,100
Equity
4,660
Total
$
6,760
Total
$
6,760
a. What is the implied level of assets at the end of 2020? (Enter your answer in dollars not in thousands.)
b. If the company pays out 50% of net income as dividends, how much cash will Drake need…
The following tables summarize the 2022 income statement and end-year balance sheet of Drake's
Bowling Alleys. Drake's financial manager forecasts a 20% increase in sales and costs in 2023. The
ratio of sales to average assets is expected to remain at 0.50. Interest is forecasted at 4% of debt at
the start of the year.
Sales
Costs
Interest
Pretax profit
Tax
Net income
Assets
Total
INCOME STATEMENT, 2022
(Figures in $ thousands)
$ 1,300
780
20
a
Assets at the end of 2021 were $2,500,000.
b Debt at the end of 2021 was $510,000.
$ 500
150
$ 350
(50% of average assets)
(60% of sales)
(4% of debt at start of year)b
(30% of pretax profit)
BALANCE SHEET, YEAR-END 2022
(Figures in $ thousands)
$ 2,700
$ 2,700
a. Implied level of assets
b. Additional cash
c. Debt ratio
Debt
Equity
$ 510
2,190
$ 2,700
a. What is the implied level of assets at the end of 2023?
Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your
answer in thousands.
b. If the company pays out…
Chapter 18 Solutions
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