Enchanted Company’s total assets fluctuate between P230,000 and P290,000. Total fixed assets remain the same at P65,000. If Enchanted Company follows a maturity matching working capital financing policy, what is the level of its long-term financing?
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PROBLEM 2:
Enchanted Company’s total assets fluctuate between P230,000 and P290,000. Total fixed assets remain the same at P65,000. If Enchanted Company follows a maturity matching working capital financing policy, what is the level of its long-term financing?
PROBLEM 3:
Polygon Inc. planning to increase resources through additional funds needed. It has a new capital budget of 500,000, a sales of 800,000 and profit amounting to 400,000, and a payout ratio of 20%. How much is the additional funds needed?
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- Calculate the external financing needed given the following financial statements. Assume that all costs, all assets, and accounts payable change proportionally with sales. Sales are projected to grow by 25%. Also assume that the company is operating at full capacity. Current Statement of Comprehensive Income Sales $50,000 CoGS 30,000 EBDIT 20,000 Depreciation 10,000 EBIT 10,000 Interest expense 5,000 Taxable income 5,000 Taxes (35%) 1,750 Net Income 3,250 Dividends 975 Addition to RE 2,275 Current Statement of Financial Position Cash $8,000 Accounts receivable 22,000 Inventory 30,000 Total current assets 60,000 Fixed assets 90,000 Total assets $150,000 Accounts payable $15,000 Notes payable 5,000 Total current liabilities 20,000 Long-term debt 40,000 Common stock 40,000 Retained earnings 50,000 Total owners’ equity 90,000 Total Liabilities and OE $150,000 Select one answer A- $33,750 B- $34,656.25 C- $30,906.25 D- $37,500 E- $22,500(Forecasting financing needs) Beason Manufacturing forecasts its sales next year to be $5.4 million and expects to earn 4.9 percent of that amount after taxes. The firm is currently in the process of projecting its financing needs and has made the following assumptions (projections): • Current assets are equal to 19.8 percent of sales, and fixed assets remain at their current level of $0.8 million. • Common equity is currently $0.78 million, and the firm pays out half of its after-tax earnings in dividends. The firm has short-term payables and trade credit that normally equal 11.8 percent of sales, and it has no long-term debt outstanding. What are Beason's financing needs for the coming year? Beason's expected net income for next year is $ (Round to the nearest dollar.)A permanent funding requirement is a constant investment in operating assets resulting from constant sales over time. A seasonal funding requirement is an investment in operating assets that varies over time as a result of cyclic sales. Let’s use an example: FIN504 Corporation holds, on average, $50,000 in cash and marketable securities, $1,500,000 in inventory, and $500,000 in accounts receivable. FIN504’s business is very stable over time, so its operating assets can be viewed as permanent. In addition, FIN504’s accounts payable of $400,000 are stable over time. Thus, FIN504 has a permanent investment in operating assets of $1,650,000 ($50,000 + $1,500,000 + $500,000 - $400,000). That amount would also equal its permanent funding requirement. How would you go about determining seasonal funding requirements?
- Bulldogs Inc. uses Additional Funds Needed as a plug item. If the company had forecast its additional financing needed to be 2,340,000, its capital budget at 3,600,000, and net income at 1,800,000, what is its retention ratio?Put percentage sign (XX%)(Forecasting financing needs) Beason Manufacturing forecasts its sales next year to be $5.6 million and expects to earn 4.3 percent of that amount after taxes. The firm is currently in the process of projecting its financing needs and has made the following assumptions (projections): • Current assets are equal to 19.3 percent of sales, and fixed assets remain at their current level of $1.1 million. • Common equity is currently $0.75 million, and the firm pays out half of its after-tax earnings in dividends. • The firm has short-term payables and trade credit that normally equal 12.1 percent of sales, and it has no long-term debt outstanding. What are Beason's financing needs for the coming year? Beason's expected net income for next year is $ 240,800 (Round to the nearest dollar.) Beason's expected common equity balance for next year is $ 870400. (Round to the nearest dollar.) Estimate Beason's financing needs by completing the pro forma balance sheet below: (Round to the nearest…Reference for questions below WORKING CAPITAL POLICY Calgary Company is thinking of modifying its working capital assets policy. Fixed assets are P600,000, sales are projected at P3 million, the EBIT/sales ratio is projected at 15%, the interest rate is 10% on all debt, the tax rate is 40%, and Calgary plans to maintain a 50% debt-to-assets ratio. Three altemative current asset policies are under consideration: 40%, 50%, and 60% of projected sales. What is the expected return on equity under restricted 40%? Your answer What is the expected return on equity under moderate 50%? Your answer What is the expected return on equity under relaxed 60%? Your answer
- The RRR Company has a target current ratio of 2. Presently, the current ratio is 2.7 based on current assets of $3,888,000. If RRR expands its fixed assets using short- term liabilities (maturities less than one year), how much additional funding can it obtain before its target current ratio is reached? (Round your answer to the nearest dollar.) O$1.133,294 $1,008,000 $717,192 $1.061,424 $504,000A firm has the following investment alternatives: Cash Inflows Year A B C 1 $ 1,100 $ 3,600 — 2 1,100 — — 3 1,100 — $ 4,562 Each investment costs $3,000; investments B and C are mutually exclusive, and the firm’s cost of capital is 8 percent. Use Appendix A, Appendix B and Appendix D to answer the questions. Assume that the investments are not mutually exclusive and there are no budget restrictions. What is the net present value of each investment? Use a minus sign to enter a negative values, if any. Round your answers to the nearest dollar. A: $ B: $ C: $ According to the net present values, which investment(s) should the firm make? The firm should make investment(s) . What is the internal rate of return on each investment? Round your answers to the nearest whole number. A: % B: % C: % According to the internal rates of return, which investment(s) should the firm make? The firm should make investment(s) . According to…4. Capital expenditure of a new investment project is $ 120,000,000; the expected annual net cash flows generated from the investment are given below. Suppose that the company's cost of capital is 10%, calculate and comment on the accounting rate of return, internal rate of return, and discounted payback period of the project. Years Cash flows($000) DF (10%) 1 40,000 0.909 2 42,000 0.826 3 50,000 0.751 4 52,000 0.683 5 55,000 0.621 SV 60,000 0.565
- Q: Semper pump company has a permanent funding requirement of $135,000 in operating asset and seasonal funding requirement that vary between $0 and $990,000 and average $101,250. If simper can borrow short-term funds at 6.25% and long term funds at 8%, and if it can earn 5% on the investment of any surplus balances, than determine the total annual cost under i) aggressive strategy ii) conservative strategy(gnore income taxes in this problem.) Your Company is considering an investment that has the following data: Year 2 5 Investment $20,000 Cash inflow $12,000 $12,000 $15,000 $4,000 $4,000 In what year does the payback period for this investment occur? Year 2. Year 3. Year 4. Year 5.Neko Inc. uses Additional Funds Needed as a plug item. If the company had forecast its additional financing needed to be 2,340,000, its capital budget at 3,600,000, and net income at 1,800,000, what is its retention ratio?
