Question

Green Lumber has total sales of $387,200 on total assets of $429,600, current liabilities of $45,000, and $24,000 of dividends paid on net income of $57,700. Assume that all costs, assets, and current liabilities change spontaneously with sales. The tax rate and dividend payout ratios remain constant. If the firm's managers project a firm growth rate of 12 percent for next year, what will be the amount of external financing needed (EFN) to support this level of growth? Assume the firm is currently operating at full capacity.

A) $11,706

B) $14,350

C) $9,911

D) $5,667

E) $8,408

Answer #1

Emerson Company has total assets of $1,575,000, long-term debt
of $630,000, stockholders' equity of $819,000, and current
liabilities of $126,000. The dividend payout ratio is 35 percent
and the profit margin is 10 percent. Assume all assets and current
liabilities change spontaneously with sales and the firm is
currently operating at full capacity. What is the external
financing need if the current sales of $2,100,000 are projected to
increase by 15 percent?

Red Hat has total assets of $620,000, long-term debt of
$236,000, stockholders' equity of $185,000, and current liabilities
of $199,000. The dividend payout ratio is 34 percent and the profit
margin is 9 percent. Assume all assets and current liabilities
change spontaneously with sales and the firm is currently operating
at full capacity. What is the external financing need if the
current sales of $840,000 are projected to increase by 15
percent?
$5,612.30
$5,769.60
$5,835.90
$5,904.20
$6,011.50

1) Coventry Comfort, Inc. has equity of $168,500, total assets
of $195,000, net income of $63,000, and dividends of $37,800.
Calculate the sustainable growth
rate?
2) Delta Ice has a profit margin of 8.3 percent and a payout
ratio of 42 percent. The firm has annual sales of $386,400, current
liabilities of $37,200, long-term debt of $123,800, and net working
capital of $16,700, and net fixed assets of $391,500. No external
equity financing is possible. What is the internal growth...

Narrow Falls Lumber has total assets of $913,600, total debt of
$424,500, net sales of $848,600, and net income of $94,000. The tax
rate is 21 percent and the dividend payout ratio is 30 percent.
What is the firm's sustainable growth rate? Assuming all external
funds will come from debt, will the firm’s debt-equity ratio change
if it grows at the sustainable growth rate? (Hint: Need to compute
Total Equity, ROE, and the fraction reinvested. Choose closest
answer if necessary)....

Urban’s, which is currently not operating at full capacity, has
sales of $47,000, current assets of $5,100, current liabilities of
$6,200, net fixed assets of $51,500, and a 5 percent profit margin.
The firm has no long-term debt and does not plan on acquiring any.
No new equity will be issued. The firm does not pay any dividends.
Sales are expected to increase by 3 percent next year. The
following items vary directly with sales – current assets and
short-term...

Narrow Falls Lumber has total assets of $913,600, total debt of
$424,500, net sales of $848,600, and net income of $94,000. The tax
rate is 21 percent and the dividend payout ratio is 30 percent.
What is the firm's sustainable growth rate? Assuming all
external funds will come from debt, will the firm’s debt-equity
ratio change if it grows at the sustainable growth rate?
(Hint:
Need to compute Total Equity, ROE, and the fraction reinvested.
Choose closest answer if necessary)....

Suppose Mariposa, Inc.’s Sales are projected to grow by 20% next
year. It has total assets that grow proportionately with sales.
Current total assets are $2 million and current total sales are $1
million. The only liabilities that change with sales are accounts
payable, which are currently $300,000. The profit margin and
dividend payout ratio are constant. The profit margin is 15 percent
and the dividend payout ratio is 60 percent. Using the “percent of
sales” approach, answer the following...

The most recent financial statements for Crosby, Inc., follow.
Sales for 2018 are projected to grow by 20 percent. Interest
expense will remain constant; the tax rate and the dividend payout
rate will also remain constant. Costs, other expenses, current
assets, fixed assets, and accounts payable increase spontaneously
with sales.
CROSBY, INC.
2017 Income Statement
Sales
$
753,000
Costs
588,000
Other expenses
24,000
Earnings before interest and taxes
$
141,000
Interest paid
20,000
Taxable income
$
121,000
Taxes (25%)
30,250...

The most recent financial statements for Moose Tours, Inc.,
appear below. Sales for 2016 are projected to grow by 25 percent.
Interest expense will remain constant; the tax rate and the
dividend payout rate will also remain constant. Costs, other
expenses, current assets, fixed assets, and accounts payable
increase spontaneously with sales.
MOOSE TOURS, INC.
2015 Income Statement
Sales
$
753,000
Costs
588,000
Other expenses
24,000
Earnings before
interest and taxes
$
141,000
Interest
expense
10,000
Taxable income
$
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The Expo Company has the most recent financial statements as
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payables. The company maintains a constant dividend payout ratio.
The projected sales growth over the next year is 10%. If the Expo
Company does not want to incur any additional external financing,
what is the maximum rate of growth the firm could achieve?
Income Statement
Balance Sheet
Assets
Liabilities and Owners' Equity
Sales
4,200.0
Current Assets
900.0
Current Liabilities
500.0
Costs...

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