Estimate the expected cash balance at the end of next year

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Question: How would your answers to the previous problem change if Manpower Corporation in problem plans to pay off its outstanding debt of $ 100 million next year and become a debtfree company?

Problem: Manpower Corporation, which provides non-government emplyments services in the United States, reported net income of $ 128 million in 1995. It had capital expenditures of $ 50 million and depreciation of $ 24 million in 1995, and its working capital was $ 500 million (on revenues of $ 5 billion). The firm has a debt ratio of 10%, and plans to maintain this debt ratio.

a. Estimate how much Manpower Corporation will have available to pay out as dividends next year.

b. The current cash balance is $ 143 million. If Manpower Corporation is expected to pay $ 12 million in dividends next year and repurchase no stock, estimate the expected cash balance at the end of the next year.

Reference no: EM131690400

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