Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 14, Problem 3SP
(Financial forecasting—discretionary financing needs) Sambonoza Enterprises projects its sales next year to be $4 million and expects to earn 5 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):
- 1. Current assets will equal 20 percent of sales, and fixed assets will remain at their current level of $1 million.
- 2. Common equity is currently $0.8 million, and the firm pays out half its after-tax earnings in dividends.
- 3. The firm has short-term payables and trade credit that normally equal 10 percent of sales, and it has no long-term debt outstanding.
What are Sambonoza’s financing requirements (i.e., total assests) and discretionary financing needs (DFN) for the coming year?
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(Round to the nearest dollar.)
Sambonoza Enterprises projects its sales next year to be $4 million and expects to earn 5 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):
1. Current assets will equal 20 percent of sales, and fixed assets will remain at their current level of $1 million.
2. Common equity is currently $0.8 million, and the firm pays out half its after-tax earnings in dividends.
3. The firm has short-term payables and trade credit that normally equal 10 percent of sales, and it has no long-
term debt outstanding.
What are Sambonoza's financing requirements (i.e., total assets) and discretionary financing needs (DFN) for the
coming year?
Chapter 14 Solutions
Foundations Of Finance
Ch. 14 - Prob. 1RQCh. 14 - Discuss the shortcomings of the percent of sales...Ch. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 1SPCh. 14 - Prob. 2SPCh. 14 - (Financial forecastingdiscretionary financing...Ch. 14 - (Financial forecastingpercent of sales) Next years...Ch. 14 - Prob. 5SPCh. 14 - (Percent of sales forecasting) Which of the...
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