Question

CCC currently has sales of $28,000,000 and projects sales of $39,200,000 for next year. The firm's...

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

Homework Answers

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
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