Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Scenario
Karen Lamont is in the process of starting a new business
and wants to forecast the first year's income statement and
balance sheet. She has made several assumptions, which are
shown below:
• Lamont has projected the firm's sales will be
$1 million in the first year.
• She believes that the operating and gross
●
profit margins will be 20 percent and 50
percent, respectively.
For working capital, Lamont has estimated the
following:
Accounts receivable as a percentage of
sales: 12%
• Inventory as a percentage of sales: 15%
Accounts payable as a percentage of
sales: 7%
●
• Accruals as a percentage of sales: 5%
• A bank has agreed to loan her $300,000,
consisting of $100,000 in short-term debt and
$200,000 in long-term debt. Both loans will
have an 8 percent interest rate.
• The firm's tax rate will be 30 percent.
●
●
• Lamont will need to purchase $350,000 in
plant and equipment.
Lamont will keep cash in the business that is equal to 5% of
sales. Lamont will provide any other…
Chachagogo, Inc. is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below.
Based on the AFN equation, what is the AFN for the coming year?
Last year's sales P200,000
Sales growth rate 40%
Last year's current assets 65,000
Last year's noncurrent assets 70,000
Last year's profit margin 20.0% L
last year's accounts payable P50,000
Last year's notes payable P25,000
Last year's accruals P20,000
Target plowback ratio 75.0%
choices:
-44,000
-50,000
-54,000
-16,000
-40,000
Jonson, Inc. is planning its operations for the coming year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the retention ratio from 90% that was used in the past to 50%, which the firm's investment bankers have recommended. Seventy-five percent of the total assets are considered…
Suppose that TV Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?
Assets
Liabilities and Equity
Current assets
$
1,000,000
Current liabilities
$
1,000,000
Fixed assets
2,000,000
Long-term debt
1,000,000
Equity
1,000,000
Total assets
$
3,000,000
Total liabilities and equity
$
3,000,000
Chapter 3 Solutions
Corporate Finance
Ch. 3 - Financial Ratio Analysis A financial ratio by...Ch. 3 - Industry-Specific Ratios So-called same-store...Ch. 3 - Sales Forecast Why do you think most long-term...Ch. 3 - Sustainable Growth In the chapter, we used...Ch. 3 - EFN and Growth Rate Broslofski Co. maintains a...Ch. 3 - Common-Size Financials One tool of financial...Ch. 3 - Asset Utilization and EFN One of the implicit...Ch. 3 - Comparing ROE and ROA Both ROA and ROE measure...Ch. 3 - Ratio Analysis Consider the ratio EBITD/Assets....Ch. 3 - Return on Investment A ratio that is becoming more...
Ch. 3 - Use the following information to answer the next...Ch. 3 - Prob. 12CQCh. 3 - Use the following information to answer the next...Ch. 3 - Use the following information to answer the next...Ch. 3 - Use the following information to answer the next...Ch. 3 - DuPont Identity If Muenster, Inc., has an equity...Ch. 3 - Equity Multiplier and Return on Equity Synovec...Ch. 3 - Prob. 3QAPCh. 3 - EFN The most recent financial statements for...Ch. 3 - Prob. 5QAPCh. 3 - Sustainable Growth If the Moran Corp. has an ROE...Ch. 3 - Prob. 7QAPCh. 3 - Prob. 8QAPCh. 3 - Prob. 9QAPCh. 3 - Prob. 10QAPCh. 3 - Prob. 11QAPCh. 3 - Prob. 12QAPCh. 3 - External Funds Needed The Optical Scam Company has...Ch. 3 - Days' Sales in Receivables A company has net...Ch. 3 - Prob. 15QAPCh. 3 - Prob. 16QAPCh. 3 - Prob. 17QAPCh. 3 - Prob. 19QAPCh. 3 - Prob. 20QAPCh. 3 - Calculating EFN The most recent financial...Ch. 3 - Prob. 22QAPCh. 3 - Prob. 23QAPCh. 3 - Prob. 26QAPCh. 3 - Prob. 27QAPCh. 3 - Prob. 28QAPCh. 3 - Prob. 29QAPCh. 3 - Prob. 30QAPCh. 3 - Calculate all of the ratios listed in the industry...Ch. 3 - Prob. 2MCCh. 3 - Prob. 3MCCh. 3 - Prob. 4MCCh. 3 - Prob. 5MC
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