What is resulting total forecasted amount of notes payable

Assignment Help Corporate Finance
Reference no: EM13198075

Question 1:

What we know-Balance sheet as of Dec 31st 2012 shown in millions

Cash 3.5
Accounts payable 9
Receivables 26
Notes payable 18
Inventories 58
Accruals 8.5
Total current assets 87.5
Total current liabilities 35.5
Net fixed assets 35
Mortgage loan 6



Common stock 15



Retained earnings 66
Total assets 122.5
Total liabilities and equity liabilities 122.5

Sales for 2012 were $350 million and net income for the year was $10.5 million, so the firm's profit margin was 3%. They paid dividends of $4.2 million to common stockholders, so its payout ratio was 40%. It tax rate is 40% and it opened at full capacity. Assume that all assets/sales ratios, spontaneous liabilities/sales ratios, the profit margin, and the payout ratio remain constant in 2013.

a. If sales are projected to increase by $70 million, or 20%, during 2013, use the AFN equation to determine their projected external capital requirements.

b. Using the AFN equation determine the self-supporting growth rate. What is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds?

c. Use the forecasted financial statement method to forecast their balance sheet for December 2013.What is the amount of notes payable reported on the 2013forecasted balance sheet?

Question 2:

Balance sheet as of Dec 31st 2012 in thousands

Cash 1,080
Accounts payable 4,320
Receivables 6,480
Accruals 2,880
Inventories 9,000
Notes payable 2,100
Total current assets 16,560
Total current liabilities 9,300
Net fixed assets 12,600
Mortgage bonds 3,500



Common stock 3,500



Retained earnings 12,860
Total assets 29,160
Total liabilities and equity 29,160





Income statement for Dec 31 2012 in thousands

Sales 36,000


Operating costs 32,440


Earnings before interest and taxes 3,560


Interest 460


Earnings before taxes 3,100


Taxes (40%) 1,240


Net income 1,860


Dividends (45%) 837


Addition to retained earnings 1,023


a. Suppose 2013 sales are projected to increase by 15% over 2012 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for Dec 31 2013. The interest rate on all debt is 10% and cash earns no interest income. Assume that all additional debt is added at the end of the year which means that you should base the forecasted interest expense on the balance of debt at the start of the year.

Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2012 the it cannot sell off any of its fixed assets and that any required financing will be borrowed as notes payable. Assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed.

b. What is the resulting total forecasted amount of notes payable?

Reference no: EM13198075

Questions Cloud

Explain modern quality practices : Students will research Ishikawa's life and work to determine the impact he has had on the world. Students will define his significant contributions to modern quality practices in terms of major impacts in a specific organization. The project will ..
Describe qualities required for editing : Discuss qualities required for editing such as attention to detail, patience, organization, and so on, and describe how you can strengthen the qualities necessary to edit well and to improve the quality
Describe at least two primary data collection methods : Imagine that you are the Director of Marketing for Central Community Hospital and are interested in collecting primary data to answer the research question "How satisfied are our Emergency Department customers.
Define the reflective paper : For this assignment, submit the remaining part of your course project, the reflective paper. This is worth 25% of your final grade.• Complete your final reflective paper on what you have learned from this course.
What is resulting total forecasted amount of notes payable : The interest rate on all debt is 10% and cash earns no interest income. Assume that all additional debt is added at the end of the year which means that you should base the forecasted interest expense on the balance of debt at the start of the ye..
How will you remind and encourage participation : Outline and describe five trips, tours, mini events, sports activities, or other excursion activities that would be appropriate to go along with a planned event. The planned event is a swim from Alcatraz to downtown San Francisco.
How does systematic approach support effective management : Identify and define one key element of a systematic research study. Provide an example of this element used in research to support management of a human services team. How does this systematic approach support effective management
How an investor can take advantage : Explain the arbitrage opportunity that exists and how an investor can take advantage of it.Give specific details about how to form the portfolio, what to buy and what to sell.
Define the main content of the national curriculum for wales : Research the main content of the national curriculum for wales. including subject heading (English,maths,science)and a brief summary of each. be-sure to explain any terminology

Reviews

Write a Review

 

Corporate Finance Questions & Answers

  Find the greatest leverage in negotiations

The announcement on February 5, 2004, of the end of the wildly successful partnership between Walt Disney Company and Pixar Animation Studios rocked the investment and entertainment world.

  Calculate the expected returns and the risk premia

The Capital Asset Pricing Model (CAPM) holds, calculate the expected returns and the risk premia of the following two portfolios.

  How would the accounts change

If Trans World stock currently sells for $42 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.

  Calculate the betas of t-bills

Calculate the Betas of T-bills, S&P500 and the four competitors. Which one of these has the highest total risk (explain what total risk means)?

  Calculate effect on equilibrium interest rate in market

How does the Federal Reserve policy affect the bond supply equation and calculate the effect on the equilibrium interest rate in this market, as a result of the Federal Reserve action.

  Find the coupon rate and the current yield

Find the coupon rate and the current yield and what is the current value of each of these bonds if the yield to maturity is 6.8 percent?

  Computing the actual break-even point

McDonnell Douglas Aircraft Company produces the C-17, the newest jet transport used by the United State Air Force. The corporation sells the C-17 for a "flyaway cost" of $175m each jet.

  What is the current value of operations in millions

Find what is the current value of operations in millions - grow at a constant rate of 3 percent.

  What is your best estimate for the stock price per share

Multiple choice questions on stocks, derivatives and capital budgeting and what is your best estimate for the stock price per share?

  Evaluate what is your net dollar sales projection

Returned merchandise will represent 2 percent of total sales and evaluate what is your net dollar sales projection for this year?

  How much life insurance do you need

Describe which health care plan you would choose. Looking at eHealth Insurance, enter your information and then pick three companies to compare

  Determine stock based on firm''s dividend yield

Determine stock based on firm's dividend yield and capital gain yield - Evaluation of two different options for stock purchase.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd