PRIN.OF CORPORATE FINANCE (LL) >CUSTOM<
12th Edition
ISBN: 9781260439137
Author: BREALEY
Publisher: MCG CUSTOM
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Question
Chapter 29, Problem 9PS
a)
Summary Introduction
To determine: The implied level of assets.
b)
Summary Introduction
To determine: The cash need to arise in the capital market by company D.
c)
Summary Introduction
To determine: The debt-ratio of the firm.
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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 2022 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 2023. 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.
Sales
Costs
Interest
Pretax profit
Tax
Net income
Income Statement
$ in thousands
$ 2,000 (40% of average assets) a
1,500
75
425
(75% of sales)
(5% of debt at start of year)b
170 (40% of pretax profit)
$ 255
aAssets at the end of 2021 were $4,800,000.
bDebt at the end of 2021 was $1,500,000.
Balance Sheet
$ in thousands
Net assets
Total
$ 5,200
$ 5,200 Debt
Equity
Total
$ 1,500
3,700
$ 5,200
a. Internal growth rate
b. Sustainable growth rate
%
%
a. What is the implied level of assets at the end of 2023?
Note: 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 to raise in the capital…
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 29 Solutions
PRIN.OF CORPORATE FINANCE (LL) >CUSTOM<
Ch. 29 - Prob. 1PSCh. 29 - Prob. 2PSCh. 29 - Sources and uses of cash and working capital...Ch. 29 - Sources and uses of cash State whether each of the...Ch. 29 - Prob. 5PSCh. 29 - Forecasts of payables Dynamic Futon forecasts the...Ch. 29 - Prob. 8PSCh. 29 - Prob. 9PSCh. 29 - Prob. 10PSCh. 29 - Prob. 11PS
Ch. 29 - Cash cycle A firm is considering several policy...Ch. 29 - Prob. 13PSCh. 29 - Collections on receivables If a firm pays its...Ch. 29 - Short-term financial plans Which items in Table...Ch. 29 - Prob. 16PSCh. 29 - Short-term financial plans Work out a short-term...Ch. 29 - Prob. 18PSCh. 29 - Prob. 19PSCh. 29 - Long-term financial plans Corporate financial...Ch. 29 - Prob. 21PSCh. 29 - Long-term financial plans a. Use the Dynamic...Ch. 29 - Long-term plans The financial statements of Eagle...Ch. 29 - Forecast growth rate a. What is the internal...Ch. 29 - Forecast growth rate Bio-Plasma Corp. is growing...Ch. 29 - Long-term plans Table 29.19 shows the 2016...
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