Suppose that Wall-E Corp. currently has the balance sheet shown below, and that salesfor the year just ended were $7.4 million. The firm also has a profit margin of 20 percent,a retention ratio of 25 percent, and expects sales of $9.4 million next year. Fixed assetsare currently fully utilized, and the nature of Wall-E's fixed assets is such that they mustbe added in $1 million increments.AssetsCurrent$2,294,000 Current liabilitiesLong-term debtEquityassetsFixed assets 5,402,000Liabilities and EquityTotal assets $7,696,000Total liabilities andequity$2,368,0001,700,0003,628,000$7,696,000If current assets and current liabilities are expected to grow with sales, what amount ofadditional funds will Wall-E need from external sources to fund the expected growth?(Enter your answer in dollars not in millions.)Additional funds needed

A balance sheet is a financial statement that reports a company's assets, liabilities, and…

Answered: Suppose that Wall-E Corp. currently has…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Samad, a Finance Manager, is attempting to forecast next year's income statement and balance sheet. Current sales are RM565,000 and are expected to increase 15% next year. The majority of the firm's operating expenses are expected to increase too. The depreciation expense is expected to be RM135,400. The planned purchase of new equipment is expected to cost RM287,000. Currently the firm has total net fixed assets of RM847,000. What will be the value of net fixed assets in the forecasted year? Select one: a. RM998,600 b. RM847,000 c. RM287,000 d. RM1,134,000
Water and Power Co. (W&P) currently has $575,000 in total assets and sales of $1,400,000. Half of W&P’s total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 22% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is . (Note: Round your answer to the nearest whole number.) W&P was using its fixed assets at only 95% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets? (Note: Round your answer to the nearest whole number.) $1,547,368 $1,768,421 $1,473,684 $1,694,737 When you consider that W&P’s fixed assets were being underused, its target fixed assets to sales ratio should be %. (Note: Round your answer to two decimal places.) When you consider that W&P’s fixed assets were being underused, how much fixed assets must W&P raise to…
Suppose Naboo Manufacturing's sales increase 20% over the next year. Assuming that all asset accounts change proportionately to sales, what is the external financing needed?
Suppose that Wind Em Corp. currently has the balance sheet shown below, and that sales for the year just ended were $7 million. The firm also has a profit margin of 27 percent, a retention ratio of 20 percent, and expects sales of $8 million next year. Assets Current assets Fixed assets Total assets Liabilities and Equity Additional funds needed $2,000,000 Current liabilities Long-term debt 5,000,000 Equity $7,000,000 Total liabilities and equity $2,500,000 1,500,000 3,000,000 $7,000,000 If all assets and current liabilities are expected to grow with sales, what amount of additional funds will Wind Em need from external sources to fund the expected growth? (Enter your answer in dollars not in millions.)
Suppose that TV Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? Assets Liabilities and Equity Current assets $ 1,000,000 Current liabilities $ 1,000,000 Fixed assets 2,000,000 Long-term debt 1,000,000 Equity 1,000,000 Total assets $ 3,000,000 Total liabilities and equity $ 3,000,000
Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year. Assets Current assets Fixed assets Total assets Liabilities and Equity Additional funds needed Current liabilities $2,000,000 4,000,000 Long-term debt Equity $6,000,000 Total liabilities and equity $1,500,000 1,500,000 3,000,000 $6,000,000 If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.)
Suppose that Psy Ops Industries currently has the balance sheet shown below, and that sales for the year just ended were $4.4 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $7.4 million next year. Assets Liabilities and Equity Current assets $ 1,980,000 Current liabilities $ 1,672,000 Fixed assets 3,700,000 Long-term debt 1,800,000 Equity 2,208,000 Total assets $ 5,680,000 Total liabilities and equity $ 5,680,000 If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will Psy Ops need from external sources to fund the expected growth? Note: Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.
Blur Corp. has an expected net operating profit after taxes, EBIT(1-T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) is Blur Corp. expected to generate over the next year? O $118,668 million $6,450 million O $8,730 million O $6,470 million Blur Corp.'s FCFs are expected to grow at a constant rate of 4.62% per year in the future. The market value of Blur Corp.'s outstanding debt is $31,412 million, and its preferred stocks' value is $17,451 million. Blur Corp. has 150 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 13.86%. Term Total firm value Intrinsic value of common equity Intrinsic value per share Value (Millions) Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table.…
Blur Corp. has an expected net operating profit after taxes, EBIT(1-T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) Is Blur Corp. expected to generate over the next year? ○ $118,668 million $6,450 million ○ $8,730 million O $6,470 million Blur Corp.'s FCFs are expected to grow at a constant rate of 4.62% per year in the future. The market value of Blur Corp.'s outstanding debt is $31,412 million, and its preferred stocks' value is $17,451 million. Blur Corp. has 150 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 13.86%. Term Total firm value Intrinsic value of common equity Intrinsic value per share Value (Millions) Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table.…
The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $270,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $70 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019(Figures in $ thousands) Revenue $ 1,800 Fixed costs 70 Variable costs (70% of revenue) 1,260 Depreciation 216 Interest (6% of beginning-of-year debt) 18 Taxable income 236 Taxes (at 35%) 83 Net income $ 153 Dividends $ 77 Addition to retained…
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
The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $270,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $70 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019(Figures in $ thousands) Revenue $ 1,800 Fixed costs 70 Variable costs (70% of revenue) 1,260 Depreciation 216 Interest (6% of beginning-of-year debt) 18 Taxable income 236 Taxes (at 35%) 83 Net income $ 153 Dividends $ 77 Addition to retained…

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