Question

CCC currently has sales of $28,000,000 and projects sales of $39,200,000 for next year. The firm's current assets equal $9,000,000 while its fixed assets are $8,000,000. The best estimate is that current assets will rise directly with sales while fixed assets will rise by $500,000. The firm presently has $3,600,000 in accounts payable, $1,800,000 in long-term debt, and $11,600,000 in common equity. All current liabilities are expected to change directly with sales. CCC plans to pay $1,000,000 in dividends next year and has a 5.0% net profit margin. What are the company's additional funds needed for the next year? (Round your answer to the nearest dollar.)

Question 9 options:

	$4,100,000
	$3,140,000
	$2,660,000
	$700,000
	$1,700,000

Answer 1

		Current	Projected
	Sales	$28,000,000	$39,200,000
	Current Assets	$9,000,000	$12,600,000	(39200000/28000000)*9000000
	Fixed Assets	$8,000,000	$8,500,000
	Accounts Payable	$3,600,000	$5,040,000	(39200000/28000000)*3600000
	Long term debt	$1,800,000
	Common Equity	$11,600,000
	Requirement of Additional Fund:
	Increase in fixed assets	$500,000	(8500000-8000000)
	Increase in current assets	$3,600,000	(12600000-9000000)
	(Increase) in current liabilities	($1,440,000)	(3600000-5040000)
	Funds required for dividend	$1,000,000
	Net Loss/(Profit) projected	($1,960,000)	(0.05*39200000)
	Additional Fund Required	$1,700,000
	Additional fund needed for next year	$1,700,000