A company projects that next year's sales will grow 19% and ROA (net income divided by the previous year's total assets) is constant at 13%, but long-term debt and equity do not change with sales automatically (except for the new retained earnings). The current year's total assets and accounts payable are $8000 and $500. Accounts payable usually grow at the same rate as sales. The company's plowback ratio is always 40%. Assuming that total assets must grow at the same speed as sales, what is next year's external financing need (round to the closest whole number and the answer could be negative)? Your Answer:
Q: Ex. Given the following prices of zero - coupon bonds, find the sequence of spot and forward rates.…
A: A zero-coupon bond is a fixed-income security that is issued at a deep discount and matures at a…
Q: Problem 9-5 Calculating Monthly Mortgage Payments [LO9-4] Based on Exhibit 9-9, or using a financial…
A: Loan amount = Present value (PV) = $120,000Year = 15Periods (N) = Year*12 = 15*12 = 180 (because…
Q: The maximum rate of return needed to induce an investor to purchase or hold a security is referred…
A: The statement is TRUE.Explanation:Step 1:An investor's required rate of return is the lowest…
Q: uge to or loss of a dwelling and personal property of of g protects the beneficiary against the…
A: The objective of the question is to understand the various aspects of insurance and how it works. It…
Q: Having heard about IPO underpricing, I put in an order to my broker for 1, 120 shares of every IPO…
A: Data given:IPOShares Allocated to mePrice per share ($)Initial Return…
Q: Which of the following statements is correct? Credit spreads decrease with volatility Credit spreads…
A: The correct statement is: "Credit spreads increase with volatility.'' And the factor that is not…
Q: Bond P is a premium bond with a 8 percent coupon. Bond D is a 3 percent coupon bond currently…
A: A bond is a financial market security that comes under the fixed-income securities, as the…
Q: The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in…
A: WACC or weighted average cost of capital is an important metric in finance. Essentially WACC is a…
Q: You are given the following information concerning the trades made on a particular stock. Calculate…
A: If the current price > previous price, then it is price Up (+)If the current price < previous…
Q: Project Analysis You are considering a new product launch. The project will cost $1.675 million,…
A: Net Present Value, is a financial measure utilized to gauge the profitability of an investment or…
Q: It is now January 1, 2021, and you are considering the purchase of an outstanding bond that was…
A: Yield to maturity refers to the percentage of return on the investment inn bond if held till…
Q: Required information [The following information applies to the questions displayed below.] A pension…
A: The Sharpe ratio of the optimal Capital Allocation Line (CAL) indicates the risk-adjusted return of…
Q: what is the aftertax salvage value of the asset? (MACRS schedule) (Do not round intermediate…
A: The after-tax salvage value is finding the amount you will receive for selling something after you…
Q: eBook Problem Walk-Through A stock is expected to pay a dividend of $2.00 at the end of the year…
A: The stock price is the price that one share of a corporation costs on the stock market. It increases…
Q: Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $30.00 per share. The…
A: The model depicts the relationship between the stock price, required return, dividend and the…
Q: Problem 8-13 Stock Valuation and PS [LO2] Z Space, Incorporated, is a new company and currently has…
A: Price - sales ratio is a financial ratio that measures the price of the stock in relation to the…
Q: General Lithograph Corporation uses no preferred stock. The firm's capital structure uses 34% debt…
A: To determine General Lithograph Corporation's Weighted Average Cost of Capital (WACC), we calculated…
Q: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 6% coupon rate,…
A: Current bond price is the present discounted value of future cash flow stream generated by the…
Q: he concept of lean manufacturing includes, among other things, a desire to minimize net working…
A: NPV is the main capital budgeting based on the time value of money and can be obtained as the…
Q: Sandhill Clinic is considering investing in new heart-monitoring equipment. It has two options.…
A: Capital budgeting:Capital budgeting facilitates prudent resource allocation, ensuring that limited…
Q: a) If the dividend yield is 1.40% annualized, the interest rate is -0.10% annualized, and the index…
A: Derivatives are financial instruments whose value is derived from the value of an underlying asset,…
Q: The index model for stock A has been estimated with the following result: RA = 0.01 + 0.9RM + eA.…
A: Beta is a measure of market risk and standard deviation is a measure of volatility/standalone…
Q: Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.7 percent, a…
A: A bond is a fixed-income instrument that pays out fixed periodic payments to the bondholders during…
Q: Intro IBM is planning to produce an expert system based on artificial intelligence and expects the…
A: Profitability index1.106Explanation:Step 1:We have to calculate the profitability index of the…
Q: You are considering a new product launch. The project will cost $1,750,000, have a 4-year life, and…
A: NPV or net present value is an important capital budgeting metric. It is essentially the sum of…
Q: Unlevering the Equity Cost of Capital-Low Leverage & High Leverage Companies: Below, we show the…
A: Imagine two companies with similar operations but different capital structures. One might be heavily…
Q: Question at position 1 What is the present value of a stream of $390 cash flow that occurs from year…
A: The ordinary annuity starts at the end of year 1.But in our case, the annuity starts at the end of…
Q: Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her…
A: Portfolio variance:Portfolio variance serves as a fundamental metric in investment analysis,…
Q: Suppose that Xtel currently is selling at $46 per share. You buy 250 shares using $8,000 of your own…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: You are considering investing in a project with the following possible outcomes: State of the…
A: In investing, standard deviation reflects the degree of fluctuation in returns from a project,…
Q: Use Excel for this question: A company announced that it will pay a $2.00 dividend, a $2.50…
A: A corporation's payout of profits to its shareholders is known as a dividend. A company that…
Q: Consider a 30-year bond with a 10% coupon rate (annual payments) and a $100 face va the initial…
A: The objective of this question is to calculate the initial price of a bond given its coupon rate,…
Q: XYZ common just paid an annual dividend of $6.00. Dividends are expected to grow of return on the…
A: The Capital Asset pricing model is used for finding out the cost of equity as it will consider risk…
Q: Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game…
A: The payback period is the number of years required to recover the initial investment. NPV is the…
Q: Use the Pl decision rule to decide if the project should be accepted or rejected? -38.88 percent,…
A: PI is the profitability index. It is used in capital budgeting to make project accept/reject…
Q: Consider the following cash flows: Year 0 1 2 3 4 Cash Flow -$ 7,600 2,150 4,900 1,950 1,650 What is…
A: Payback Period is the time taken by cash flows of the project to recover the initial cost of…
Q: Annuity Review Problem: You are buying a perpetuity-immediate that makes annual payments X, X + 1, X…
A: Annuity is series of equal uniform payments that are paid at equal intervals and are in orderly…
Q: Suppose that you have 12, 000 in a rather risky investment recommended by your financial advisor.…
A: Percentage return is the gain or loss on an investment, expressed as a proportion of the initial…
Q: Required information [The following information applies to the questions displayed below.] A pension…
A: Expected return of Stock fund (S)17%Expected return of bond fund (B)11%Risk-free rate…
Q: At the end of each of the next 8 years, you planto put $25,000 of your annual salary in thebank. If…
A: The objective of this question is to calculate the present value of the planned savings stream and…
Q: $9.3 percent, a YTM of 7.3 percent ond making semiannual payments. $9.3 percent, and also has 18 ye…
A: Bond XBond YFace value$1,000.00$1,000.00Coupon rate9.3%7.3%YTM7.3%9.3%Compounding frequency22Years…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: Sales= $500,000Initial cost = $1,440,000Sales growth rate = 5%Manufacturing cost = 90% of…
Q: Founders of a firm put up 140 million at time 1 to be withdrawn completely at time 2 by selling the…
A: To calculate the market values of the firm at each period, we need to discount the future cash…
Q: Crate stock is expected to pay dividends of $1 per share one year from today, and $1.5 per share in…
A: Option (4) $16.61Explanation:Given information, Dividend in one year (D1) = $1Dividend in year two…
Q: Tattletale News Corporation has been growing at a rate of 10% per year, and you expect this growth…
A: Value of a stock is calculated by adding the present values of a stock's future cash flows such a…
Q: What is the amount of the quarterly deposits A such that you will be able to withdraw the amounts…
A: Present value is the equivalent value of future money today based on time value of money and period…
Q: Compute the earnings after taxes for years 1 through 7 5. Compute the OCF for years 1 through 7 6.…
A: The idea employed in this issue is the capital budgeting approach, a procedure that businesses use…
Q: Nighthawk Steel, a manufacturer of specialized tools, has $5,220,000 in assets. Temporary current…
A: Earnings after taxes is the amount of net earnings earned by an organization after deducting the…
Q: A proposed project has fixed costs of $108,000 per year. The operating cash flow at 6,800 units is…
A: The degree of operating leverage is a sensitivity measure that accounts for the fixed costs…
Q: Suppose that during a 10 year period, a corporation's stock has a 2:1 split. By what percent would…
A: Stock splits are corporate actions in which a company increases the number of its outstanding shares…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- The table shows the forecast cash flow information of Good Time Inc. for the nextyear. The required debt payment in the next year is $88 million, with a current market valueof $60 million. The company pays no tax. If you invest in the corporate debt of Good TimeInc. today, what is your expected return on this investment?Tomey Supply Company’s financial statements for the most recent fiscal year are shown below. The company projects that sales will increase by 11 percent next year. Assume that all costs and assets increase directly with sales. The company has a constant 35 percent dividend payout ratio and has no plans to issue new equity. Any financing needed will be raised through the sale of long-term debt. Prepare pro forma financial statements for the coming year based on this information, and calculate the EFN for Tomey. Tomey Supply Company Income Statement and Balance Sheet Income Statement Balance Sheet Revenues $1,768,121 Assets Costs 1,116,487 Current Assets $280,754 EBT 651,634 Net Fixed Assets 713,655 Taxes (35%) 228,072 Total assets $994,409 Net Income $423,562 Liabilities and Equity: Current Liabilities $167,326 Long-term debt 319,456 Common Stock 200,000 Retained Earnings 307,627 Total liabilities…Suppose that Barone Corporation's sales are expected to increase from $5 million this year (year 0) to $6 million next year (year 1). Its assets totaled $2,500,000 in year 0. Barone is at full capacity, so its assets must grow in proportion to projected sales. At the end of year 0, current liabilities are $800,000, consisting of $200,000 of accounts payable, $400,000 of notes payable, and $200,000 of accrued liabilities. Barone's profit margin is forecasted to be 3.00% and the forecasted retention ratio is 25.00%. Barone seeks to forecast the additional funds needed using the AFN equation. Let A represent Barone's assets and So represent sales in year 0. Let AS represent the change in sales in from year 0 to year 1. According to the video, which of the following best represents the projected increase in assets as part of the AFN equation? -AS + AS × AS × So Using the formula from the video, the projected increase in assets, as part of the AFN equation, is
- Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O -26.37% 64.8% O-16.63% $110 million $101 million $61 millionTobin Supplies Company expects sales next year to be $500,000. Inventory and accounts receivable will increase $90,000 to accommodate this sales level. The company has a steady profit margin of 12 percent with a 40 percent dividend payout. How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.The table below shows the forecast cash flow information of Good Time Inc. for the nextyear. The required debt payment in the next year is $88 million, with a current market valueof $60 million. The company pays no tax. If you invest in the corporate debt of Good TimeInc. today, what is your expected return on this investment? hand write please
- Magnum, Inc., projects next year's sales to be $20 million. Current sales are at $15 million, based on current assets of $7 million and fixed assets of $8 million. The firm's net profit margin is 5 percent after taxes. Magnum forecasts that current assets will rise in direct proportion to the increase in sales but that fixed assets will increase by only $150,000. Currently, Magnum has $1.5 million in accounts payable (which vary directly with sales), $7 million in long-term debt (due in 10 years), and common equity (including $4 million in retained earnings) totaling $6.5 million. Magnum plans to pay $500,000 in common stock dividends next year. What are Magnum's total financing needs (that is, total assets) for the coming year?Crazytown Motors is expected to have an EBIT of $680,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $45,000, $9,000, and $40,000, respectively. All cash flow items are expected to grow at 6 percent per year for two years. After Year 3, the CFA is expected to grow at 3 percent indefinitely. The company currently has $3 million in debt and 250,000 shares outstanding. The company's WACC is 9.5 percent and the tax rate is 20 percent. What is the present value of terminal value? Show your steps. What is the price per share of the company's stock? Show your steps.Roland Company has a new management team that has developed an operating plan to improve upon last year’s ROE. The new plan would place the debt ratio at 55%, which will result in interest charges of 7,000 per year. EBIT is projected to be 25,000 on sales of 270,000, it expects to have a total asset turnover ration of 3.0, and the average tax rate will be 40%. What does Roland Company expect its return on equity (ROE) to be following the changes?
- Hernandez Corporation expects to have the following data during the coming year. What is Hernandez's expected ROE? (Show your work) Assets = $200,000 D/A = 65% EBIT = $25,000 Interest rate = 8% Tax rate = 40%The company has sales of $ 10 million per year, all of which are from credit terms that require payment to be made within 30 days, and the company's account receivables amount to $ 2 million. What is the DSO of the company, what is the value if all borrowers pay on time, and how much capital will be released if the company takes actions that lead to timely payment?Roland & Company has a new management team that has developed an operating plan to improveupon last year’s ROE. The new plan would place the debt ratio at 55 percent, which will result ininterest charges of $7,000 per year. EBIT is projected to be $25,000 on sales of $270,000, it expects tohave a total assets turnover ratio of 3.0, and the average tax rate will be 40 percent. What does Roland& Company expect its return on equity to be following the changes?