A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase? Answer AJThe company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity. B)The company increases its dividend payout ratio. CThe company begins to pay employees monthly rather than weekly. DIThe company's profit margin increases. E)The company decides to stop taking discounts on purchased materials.

A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase? Answer AJThe company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity. B)The company increases its dividend payout ratio. CThe company begins to pay employees monthly rather than weekly. DIThe company's profit margin increases. E)The company decides to stop taking discounts on purchased materials.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 11P: Brushy Mountain Mining Companys coal reserves are being depleted, so its sales are falling. Also,...

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A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase? a. The company's profit margin increases. b. The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity. c. The company increases its dividend payout ratio. d. The company decides to stop taking discounts on purchased materials. e. The company begins to pay employees monthly rather than weekly.
Which of the following statements is correct? A. a. Since accounts payable and accruals must eventually be paid, as these accounts increase, AFN also increases. B. b. Suppose a firm is operating its fixed assets below 100 percent capacity but is at 100 percent with respect to current assets. If sales grow, the firm can offset the needed increase in current assets with its idle fixed assets capacity. C. c. If a firm retains all of its earnings, then it will not need any additional funds to support sales growth. D. d. Additional funds needed are typically raised from some combination of notes payable, long-term bonds, and common stock. These accounts are nonspontaneous in that they require an explicit financing decision to increase them. E. e. All of the statements above are false.
Alderson Metals is compiling a cash balance projection by quarter for next year. Which one of the following adjustments to this projection will decrease the cumulative surplus? A. Reducing payroll costs from its current projection amount B. Decreasing the accounts receivable period by changing the firm's credit policy effective the first of next year C. Receiving more favorable credit terms from the firm's suppliers D. Increasing the dividend per share on the firm's outstanding common stock E. Refinancing the firm's long-term debt at a lower interest rate
A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? 1. b. Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. 2. d. Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year. 3. e. Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash. 4. a. Use cash to increase inventory holdings. 5. c. Use cash to repurchase some of the company's own stock.
Brushy Mountain Mining Companys coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the companys earnings and dividends are declining at the constant rate of 4% per year. If D0 = 6 and rs = 14%, what is the estimated value of Brushy Mountains stock?
Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
Read the scenario below and answer the questions that follow. A company is under pressure from influential shareholders to change its dividend policy. The company has always followed the residual dividend policy, but the influential shareholders feel that the company needs to change to a stable pay-out ratio policy. The company just reported earnings of R232m for the year ended 31 March 2024. The company is considering the following investment opportunities for the upcoming financial year: Investment opportunity A BUD C E Cost R72m R62m R110m R96m R48m Internal rate of return 14.28% 13.03% 15.67% 16.01% 13.79% The company's cost of capital is 13.5% and its target capital structure is represented by a debt-to-assets ratio of 40%. The company has 28m ordinary shares outstanding.
Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
Suppose C Manufacturings sales increase 20% over the next year. Assuming all asset accounts change proportionately to sales, there is no change in dividend or tax rate and that new growth is financed by equity, what will company be paying out in dividends for 2021? 1. $14,400 2. $12,960 3. $2,160 4. $3,600 5. $31,250
Ace Corporation is considering expanding its operations. If it expands, its current accounts are expected to change. Cash will increase by $20,000, accounts receivable by $40,000, and inventories by $60,000. At the same time accounts payable are going to increase by $50,000, accruals by $10,000, and long-term debt by $100,000. What will be the change in net working capital? Besides, this company plans to sell an existing asset for $21,000. The asset cost $10,000 and it was being depreciated under MACRS using a five-year recovery period. Until now, it has been depreciated for four full years. The tax rate is 40 percent on both ordinary income and capital gains. What is the tax effect of this transaction?
Q. Western Lumber Company expects to have free cash flow in the coming year of $4.25mand is expected to grow at 4% per year thereafter. The company has an equity cost of10% and a debt cost of 6% and pays corporate tax at 30%. If the company maintains adebt-to-equity ratio of 0.50, what is the value of the interest tax shield? Please answer by providing step by step solution and explaining the whole process
XYZ Corp. is anticipating a sustained growth rate of 15% per year. Is it possible for them to achieve this growth rate given the following numbers. Debtequity ratio of 0.40 times Profit margin is 5.3 percent Capital Intensity Ratio is 0,75 times to answer: determine what the dividend payout ratio must be. How do you interpret the result?