EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 16P
Summary Introduction
To compute: Earning per share probability.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Weatherford Industries Inc. has the following ratios:A0*/S0 = 1.6; L0*/S0 = 0.4; profit margin = 0.10; and payout ratio = 0.45, or 45%. Sales lastyear were $100 million. Assuming that these ratios will remain constant, use the AFN equationto determine the maximum growth rate (the sustainable growth rate) Weatherford canachieve without having to employ nonspontaneous external funds.
Edwards Industries has $340 million in sales. The company expects that its sales will increase 15% this year. Edwards' CFO uses a simple linear regression to forecast the company's receivables level for a given level of projected sales. On
the basis of recent history, the estimated relationship between receivables and sales (in millions of dollars) is as follows:
Receivables = $9.75 + 0.13(Sales)
Given the estimated sales forecast and the estimated relationship between receivables and sales, what are your forecasts of the company's year-end balance for receivables? Enter your answer in millions. For example, an answer of
$25,400,000 should be entered as 25.40. Do not round intermediate calculations. Round your answer to two decimal places.
million
What are your forecasts of the company's year-end days sales outstanding (DSO) ratio? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.
days
Question attached below.
Chapter 14 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 14.A - Prob. 1QTDCh. 14.A - Prob. 2QTDCh. 14.A - Prob. 3QTDCh. 14.A - Prob. 2PCh. 14.A - Prob. 3PCh. 14.A - Prob. 4PCh. 14.A - Prob. 5PCh. 14.A - Prob. 6PCh. 14.A - Prob. 7PCh. 14.A - Prob. 8P
Ch. 14 - Prob. 1QTDCh. 14 - Prob. 2QTDCh. 14 - Prob. 3QTDCh. 14 - Prob. 4QTDCh. 14 - Prob. 5QTDCh. 14 - Prob. 6QTDCh. 14 - Prob. 7QTDCh. 14 - Prob. 8QTDCh. 14 - Prob. 9QTDCh. 14 - Prob. 10QTDCh. 14 - Prob. 11QTDCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3PCh. 14 - Prob. 4PCh. 14 - Prob. 5PCh. 14 - Prob. 6PCh. 14 - Prob. 7PCh. 14 - Prob. 8PCh. 14 - Prob. 9PCh. 14 - Prob. 10PCh. 14 - Prob. 11PCh. 14 - Prob. 12PCh. 14 - Prob. 13PCh. 14 - Prob. 14PCh. 14 - Prob. 15PCh. 14 - Prob. 16PCh. 14 - Prob. 17PCh. 14 - Prob. 18PCh. 14 - Prob. 19PCh. 14 - Prob. 20PCh. 14 - Prob. 21PCh. 14 - Prob. 22PCh. 14 - Prob. 23PCh. 14 - Prob. 24PCh. 14 - Prob. 25PCh. 14 - Prob. 26PCh. 14 - Prob. 27PCh. 14 - Prob. 28PCh. 14 - Prob. 29PCh. 14 - Prob. 30PCh. 14 - Prob. 31PCh. 14 - Prob. 32PCh. 14 - Prob. 33PCh. 14 - Prob. 34P
Knowledge Booster
Similar questions
- 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?arrow_forwardDigital Technology wishes to determine its coefficient of variation as a company over time. The firm projects the following data (in millions of dollars): Year 1 3 6 9 Profits: Expected Value $ 97 135 243 277 Year 1 3 6 a. Compute the coefficient of variation (V) for each time period. Note: Round your answers to 3 decimal places. 9 Standard Deviation $34 55 Yes 128 176 No b. Does the risk (V) appear to be increasing over a period of time? Coefficient of Variationarrow_forward(Financial forecasting—percent of sales) Next year’s sales for Cumberland Mfg. are expected to be $22 million. Current sales are $18 million, based on current assets of $5 million and fixed assets of $5 million. The firm’s net profit margin is 5 percent after taxes. Cumberland estimates that current assets will rise in direct proportion to the increase in sales but that its fixed assets will increase by only $150,000. Currently, Cumberland has $2 million in accounts payable (which vary directly with sales), $1 million in long-term debt (due in 10 years), and common equity (including $4 million in retained earnings) totaling $6.5 million. Cumberland plans to pay $750,000 in common stock dividends next year. Required: What are Cumberland’s total financing needs (that is, total assets) for the coming year? Given the firm’s projections and dividend payment plans, what are its discretionary financing needs? Based on your projections, and assuming that the $150,000 expansion in fixed assets…arrow_forward
- Unit sales are expected to reach 30,000 per year, the price per unit is expected to be $90, variable costs are $40 per unit and fixed costs are $80,000 per year. The company pays $250,000 in interest per year. What is the degree of financial leverage at the expected levels? Using the degree of financial leverage, what is the expected percentage change in earnings per share (EPS) if EBIT turns out to be 12% lower than expected?arrow_forwardTinberg Cans expects sales next year to be $50,000,000. Inventory and accounts receivable (combined) will increase $8,000,000 to accommodate this sales level. The company has a profit margin at 6%. Its dividend payout is 30% of profit. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.arrow_forwardMexican Motors’ market cap is 600 billion pesos. Next year’s free cash flow is 15.0 billion pesos. Mexican Motors has generally earned about 14% on book equity (ROE = 14%) and reinvested 30% of earnings. The remaining 70% of earnings has gone to free cash flow. Suppose the company maintains the same ROE and investment rate for the long run. What would be the rate of return? Multiple Choice 7.8% 11.8% 6.7% 10.1% 5.9%arrow_forward
- In this exercise, we develop a model for the growth rate G, in thousands of dollars per year, in sales of a product as a function of the sales level s, in thousands of dollars.† The model assumes that there is a limit to the total amount of sales that can be attained. In this situation, we use the term unattained sales for the difference between this limit and the current sales level. For example, if we expect sales to grow to 4 thousand dollars in the long run, then 4 − s gives the unattained sales. The model states that the growth rate G is proportional to the product of the sales level s and the unattained sales. Assume that the constant of proportionality is 0.8 and that the sales grow to 2 thousand dollars in the long run. (a) Find a formula for unattained sales.(b) Write an equation that shows the proportionality relation for G.G =arrow_forwardYou are trying to value Lucid Motors using comparables analysis. You believe Lucid Motors should be valued similarly to TSLA and that TSLA is the only reasonable comparison. TSLA is currently trading at 10.7x Enterprise Value/Revenue. Lucid is expected to generate $2.2bn in revenues this year. How mucb should you be willing to value Lucid in terms of enterprise Value (assuming market is correct)? $20.6bn $23.5bn $15.4 bn $21.7 bnarrow_forwardK Assume that Ideko's market share will increase by 0.40 percent per year as shown in the table, (e.g., Ideko's market share will be 10.00% in 2006). What production capacity will Ideko require each year for the next five years? When will an expansion become necessary (i.e., when will production volume exceed the current level by 50%)? e. What production capacity will Ideko require each year for the next five years? First compute the projected annual market share. Then, using these projections, calculate the projected annual production volume: (Round the volumes to one decimal place and the percentage of market share to two decimal places.) dd Sales Data Market Size (000 units) Market Share Production Volume (000 units) Data table Growth/Year 2005 4.80% 0.40% % (Click on the following icon in order to copy its contents into a spreadsheet.) - X Ideko Sales Assumptions Sales Data Growth/Year 2005 Market Size (000 units) Market Share 4.80% 10.000 0.40% 9.6% Check answerarrow_forward
- ACME Inc. has the following ratios: A0/S0- 1.3; LO/SO-0.40; profit margin-0.14; and the dividend payout ratio- .32, or 32%. Sales last year were $85 million. Assuming that these ratios will remain constant, use the AFN equation to determine the firm's self-supporting growth rate-in other words, the maximum growth rate ACME can achieve without having to employ non-spontaneous external funds. (Equation 9-2, which is 9-1, solving for g)arrow_forwardEdwards Industries has $320 million in sales. The companyexpects that its sales will increase 12% this year. Edwards’ CFO uses a simple linearregression to forecast the company’s receivables level for a given level of projected sales.On the basis of recent history, the estimated relationship between receivables and sales (inmillions of dollars) is as follows:Receivables = $9.25 + 0.07(Sales)Given the estimated sales forecast and the estimated relationship between receivables andsales, what are your forecasts of the company’s year-end balance for receivables and itsyear-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basisof a 365-day year.arrow_forwardDigital Technology wishes to determine its coefficient of variation as a company over time. The firm projects the following data (in millions of dollars): Year Profits: Expected Value Standard Deviation 1 $ 99 $ 37 3 125 52 6 181 100 9 249 150 Compute the coefficient of variation (V) for each time period. Note: Round your answers to 3 decimal places. year cofficient of variation 1 3 6 9arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT