What will be the final amounts of profit, dividend, Working Capital and Contingency reserve? The following information
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The following information relates to Komatsu, a giant in manufacturing heavy engineering equipments. The company is listed in the stock exchange. 2011 was a good year for the company with good cash profits in hand. With this additional cash, the company wants to Part 1 grow inorganically and is planning to take over its supplier, Mitsui engineering. At the same time, the company can also grow by expanding its equipment line. The detailed information about the growth alternatives are given below. To evaluate the projects, the company uses a discounting rate of 10%. The company does not accept any project with an IRR less than 20%. Part 2 Since the company has generated significant cash in profits, it wants to utilise it optimally. So, after utilising its cash for expansion, it now wants to increase its voting control. So, it wants to use $36,000 for buying back some of its outstanding shares. The current market price of the shares are $13.5, but on its buyback announcements, the share price rose to $15. The company has 10,000 shares outstanding. Part 3 The company expects a successful buyback program, after which it wants to pay dividends to the existing shareholders. In the previous year, it paid a dividend of $0.47 per share, this year it plans to pay $0.5 per share. Since the company is capital intensive, it has a significant working capital requirements. So, out of the left over profits, the company wants to keep 60% of it for working capital requirements and the rest for contingency cash. Calculate, the amount of profits in dollar terms that are used in investments, share buy back, dividend payments, working capital and contingency reserves. Part 4 Question Net sales Cost of goods sold Income Statements Gross profit SG & A expenses Depreciation expenses Operating profits Extraordinary items Earnings before Interest & tax (EBIT) Net interest expense Earnings before tax (EBT) Income tax expense (40%) Earnings after tax (EAT) 31-Dec-10 31-Dec-11 $900,000 $945,000 -774000 -812700 $126,000 $132,300 -31500 -$33,100 $94,500 $99,200 $0 $99,200 $10,470 10 $94,500 -8600 $85, -34360 $51,540.0 $88,730 -35492 $53,238 Time of Cash Flow Expected CFs of Mitsui Engineering Expected cash flows of new product line Investment ($11,000.00) ($12,000.00) Year 1 Year 2 Year 3 Year 4 Year 5 2,000.00 4,000.00 3,000.00 4,000.00 4,000.00 4,000.00 5,000.00 4,000.00 7,000.00 4,000.00 The following information relates to Komatsu, a giant in manufacturing heavy engineering equipments. The company is listed in the stock exchange. 2011 was a good year for the company with good cash profits in hand. With this additional cash, the company wants to Part 1 grow inorganically and is planning to take over its supplier, Mitsui engineering. At the same time, the company can also grow by expanding its equipment line. The detailed information about the growth alternatives are given below. To evaluate the projects, the company uses a discounting rate of 10%. The company does not accept any project with an IRR less than 20%. Part 2 Since the company has generated significant cash in profits, it wants to utilise it optimally. So, after utilising its cash for expansion, it now wants to increase its voting control. So, it wants to use $36,000 for buying back some of its outstanding shares. The current market price of the shares are $13.5, but on its buyback announcements, the share price rose to $15. The company has 10,000 shares outstanding. Part 3 The company expects a successful buyback program, after which it wants to pay dividends to the existing shareholders. In the previous year, it paid a dividend of $0.47 per share, this year it plans to pay $0.5 per share. Since the company is capital intensive, it has a significant working capital requirements. So, out of the left over profits, the company wants to keep 60% of it for working capital requirements and the rest for contingency cash. Calculate, the amount of profits in dollar terms that are used in investments, share buy back, dividend payments, working capital and contingency reserves. Part 4 Question Net sales Cost of goods sold Income Statements Gross profit SG & A expenses Depreciation expenses Operating profits Extraordinary items Earnings before Interest & tax (EBIT) Net interest expense Earnings before tax (EBT) Income tax expense (40%) Earnings after tax (EAT) 31-Dec-10 31-Dec-11 $900,000 $945,000 -774000 -812700 $126,000 $132,300 -31500 -$33,100 $94,500 $99,200 $0 $99,200 $10,470 10 $94,500 -8600 $85, -34360 $51,540.0 $88,730 -35492 $53,238 Time of Cash Flow Expected CFs of Mitsui Engineering Expected cash flows of new product line Investment ($11,000.00) ($12,000.00) Year 1 Year 2 Year 3 Year 4 Year 5 2,000.00 4,000.00 3,000.00 4,000.00 4,000.00 4,000.00 5,000.00 4,000.00 7,000.00 4,000.00 The following information relates to Komatsu, a giant in manufacturing heavy engineering equipments. The company is listed in the stock exchange. 2011 was a good year for the company with good cash profits in hand. With this additional cash, the company wants to Part 1 grow inorganically and is planning to take over its supplier, Mitsui engineering. At the same time, the company can also grow by expanding its equipment line. The detailed information about the growth alternatives are given below. To evaluate the projects, the company uses a discounting rate of 10%. The company does not accept any project with an IRR less than 20%. Part 2 Since the company has generated significant cash in profits, it wants to utilise it optimally. So, after utilising its cash for expansion, it now wants to increase its voting control. So, it wants to use $36,000 for buying back some of its outstanding shares. The current market price of the shares are $13.5, but on its buyback announcements, the share price rose to $15. The company has 10,000 shares outstanding. Part 3 The company expects a successful buyback program, after which it wants to pay dividends to the existing shareholders. In the previous year, it paid a dividend of $0.47 per share, this year it plans to pay $0.5 per share. Since the company is capital intensive, it has a significant working capital requirements. So, out of the left over profits, the company wants to keep 60% of it for working capital requirements and the rest for contingency cash. Calculate, the amount of profits in dollar terms that are used in investments, share buy back, dividend payments, working capital and contingency reserves. Part 4 Question Net sales Cost of goods sold Income Statements Gross profit SG & A expenses Depreciation expenses Operating profits Extraordinary items Earnings before Interest & tax (EBIT) Net interest expense Earnings before tax (EBT) Income tax expense (40%) Earnings after tax (EAT) 31-Dec-10 31-Dec-11 $900,000 $945,000 -774000 -812700 $126,000 $132,300 -31500 -$33,100 $94,500 $99,200 $0 $99,200 $10,470 10 $94,500 -8600 $85, -34360 $51,540.0 $88,730 -35492 $53,238 Time of Cash Flow Expected CFs of Mitsui Engineering Expected cash flows of new product line Investment ($11,000.00) ($12,000.00) Year 1 Year 2 Year 3 Year 4 Year 5 2,000.00 4,000.00 3,000.00 4,000.00 4,000.00 4,000.00 5,000.00 4,000.00 7,000.00 4,000.00 The following information relates to Komatsu, a giant in manufacturing heavy engineering equipments. The company is listed in the stock exchange. 2011 was a good year for the company with good cash profits in hand. With this additional cash, the company wants to Part 1 grow inorganically and is planning to take over its supplier, Mitsui engineering. At the same time, the company can also grow by expanding its equipment line. The detailed information about the growth alternatives are given below. To evaluate the projects, the company uses a discounting rate of 10%. The company does not accept any project with an IRR less than 20%. Part 2 Since the company has generated significant cash in profits, it wants to utilise it optimally. So, after utilising its cash for expansion, it now wants to increase its voting control. So, it wants to use $36,000 for buying back some of its outstanding shares. The current market price of the shares are $13.5, but on its buyback announcements, the share price rose to $15. The company has 10,000 shares outstanding. Part 3 The company expects a successful buyback program, after which it wants to pay dividends to the existing shareholders. In the previous year, it paid a dividend of $0.47 per share, this year it plans to pay $0.5 per share. Since the company is capital intensive, it has a significant working capital requirements. So, out of the left over profits, the company wants to keep 60% of it for working capital requirements and the rest for contingency cash. Calculate, the amount of profits in dollar terms that are used in investments, share buy back, dividend payments, working capital and contingency reserves. Part 4 Question Net sales Cost of goods sold Income Statements Gross profit SG & A expenses Depreciation expenses Operating profits Extraordinary items Earnings before Interest & tax (EBIT) Net interest expense Earnings before tax (EBT) Income tax expense (40%) Earnings after tax (EAT) 31-Dec-10 31-Dec-11 $900,000 $945,000 -774000 -812700 $126,000 $132,300 -31500 -$33,100 $94,500 $99,200 $0 $99,200 $10,470 10 $94,500 -8600 $85, -34360 $51,540.0 $88,730 -35492 $53,238 Time of Cash Flow Expected CFs of Mitsui Engineering Expected cash flows of new product line Investment ($11,000.00) ($12,000.00) Year 1 Year 2 Year 3 Year 4 Year 5 2,000.00 4,000.00 3,000.00 4,000.00 4,000.00 4,000.00 5,000.00 4,000.00 7,000.00 4,000.00 The following information relates to Komatsu, a giant in manufacturing heavy engineering equipments. The company is listed in the stock exchange. 2011 was a good year for the company with good cash profits in hand. With this additional cash, the company wants to Part 1 grow inorganically and is planning to take over its supplier, Mitsui engineering. At the same time, the company can also grow by expanding its equipment line. The detailed information about the growth alternatives are given below. To evaluate the projects, the company uses a discounting rate of 10%. The company does not accept any project with an IRR less than 20%. Part 2 Since the company has generated significant cash in profits, it wants to utilise it optimally. So, after utilising its cash for expansion, it now wants to increase its voting control. So, it wants to use $36,000 for buying back some of its outstanding shares. The current market price of the shares are $13.5, but on its buyback announcements, the share price rose to $15. The company has 10,000 shares outstanding. Part 3 The company expects a successful buyback program, after which it wants to pay dividends to the existing shareholders. In the previous year, it paid a dividend of $0.47 per share, this year it plans to pay $0.5 per share. Since the company is capital intensive, it has a significant working capital requirements. So, out of the left over profits, the company wants to keep 60% of it for working capital requirements and the rest for contingency cash. Calculate, the amount of profits in dollar terms that are used in investments, share buy back, dividend payments, working capital and contingency reserves. Part 4 Question Net sales Cost of goods sold Income Statements Gross profit SG & A expenses Depreciation expenses Operating profits Extraordinary items Earnings before Interest & tax (EBIT) Net interest expense Earnings before tax (EBT) Income tax expense (40%) Earnings after tax (EAT) 31-Dec-10 31-Dec-11 $900,000 $945,000 -774000 -812700 $126,000 $132,300 -31500 -$33,100 $94,500 $99,200 $0 $99,200 $10,470 10 $94,500 -8600 $85, -34360 $51,540.0 $88,730 -35492 $53,238 Time of Cash Flow Expected CFs of Mitsui Engineering Expected cash flows of new product line Investment ($11,000.00) ($12,000.00) Year 1 Year 2 Year 3 Year 4 Year 5 2,000.00 4,000.00 3,000.00 4,000.00 4,000.00 4,000.00 5,000.00 4,000.00 7,000.00 4,000.00 The following information relates to Komatsu, a giant in manufacturing heavy engineering equipments. The company is listed in the stock exchange. 2011 was a good year for the company with good cash profits in hand. With this additional cash, the company wants to Part 1 grow inorganically and is planning to take over its supplier, Mitsui engineering. At the same time, the company can also grow by expanding its equipment line. The detailed information about the growth alternatives are given below. To evaluate the projects, the company uses a discounting rate of 10%. The company does not accept any project with an IRR less than 20%. Part 2 Since the company has generated significant cash in profits, it wants to utilise it optimally. So, after utilising its cash for expansion, it now wants to increase its voting control. So, it wants to use $36,000 for buying back some of its outstanding shares. The current market price of the shares are $13.5, but on its buyback announcements, the share price rose to $15. The company has 10,000 shares outstanding. Part 3 The company expects a successful buyback program, after which it wants to pay dividends to the existing shareholders. In the previous year, it paid a dividend of $0.47 per share, this year it plans to pay $0.5 per share. Since the company is capital intensive, it has a significant working capital requirements. So, out of the left over profits, the company wants to keep 60% of it for working capital requirements and the rest for contingency cash. Calculate, the amount of profits in dollar terms that are used in investments, share buy back, dividend payments, working capital and contingency reserves. Part 4 Question Net sales Cost of goods sold Income Statements Gross profit SG & A expenses Depreciation expenses Operating profits Extraordinary items Earnings before Interest & tax (EBIT) Net interest expense Earnings before tax (EBT) Income tax expense (40%) Earnings after tax (EAT) 31-Dec-10 31-Dec-11 $900,000 $945,000 -774000 -812700 $126,000 $132,300 -31500 -$33,100 $94,500 $99,200 $0 $99,200 $10,470 10 $94,500 -8600 $85, -34360 $51,540.0 $88,730 -35492 $53,238 Time of Cash Flow Expected CFs of Mitsui Engineering Expected cash flows of new product line Investment ($11,000.00) ($12,000.00) Year 1 Year 2 Year 3 Year 4 Year 5 2,000.00 4,000.00 3,000.00 4,000.00 4,000.00 4,000.00 5,000.00 4,000.00 7,000.00 4,000.00
Expert Answer:
Answer rating: 100% (QA)
To calculate the final amounts of profit dividend working capital and contingency reserve lets break ... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
In January, the board of directors of the Montgomery Corporation, one of Canada's largest retail store chains, was having its regularly scheduled meeting to establish and declare the next quarterly...
-
Both of the following questions are essentially the same. Does the difference in wording seem as though it could affect the way that people respond? Are you in favor of the "Defense of Marriage...
-
A typical small flashlight contains two batteries, each having an emf of 1.5 V, connected in series with a bulb having resistance 17 . (a) If the internal resistance of the batteries is negligible,...
-
(a) For a given value of the principal quantum number n, how many values of the orbital quantum number are possible? (b) For a given value of how many values of the orbital magnetic quantum number m...
-
Describe blueprinting.
-
Prab Robots, Inc., reported the following information regarding 2011??2012 inventory. Instructions(a) Why might Prab Robots, Inc., use two different methods for valuing inventory?(b) Comment on why...
-
Maemo is a Canadian producer of high quality athletic wear. Its products are marketed to men, women, and teens who strive to maintain a healthy and active lifestyle and who are passionate about...
-
Many Americans care deeply about what they eat and feed their family. They fear conventional factory farming, wish to be good stewards of the environment, and desire a sustainable lifestyle....
-
Describe the conditions of the Great Depression; specifically - what was occurring with the Gross Domestic Product, unemployment, prices, and banks? Question 2 You read about four key contributors to...
-
The balance sheet provides information about the nature and amounts of investments in enterprise resources, obligations to creditors, and the owners' equity in net enterprise resources. Please...
-
Carbon monoxide (CO) contained in a piston-cylinder arrangement, initially at 5.3 bar and 497 K, undergoes an expansion to a final temperature of 224 K, during which the pressure-volume relationship...
-
For the function evaluate the left and right limits as a -1. Provide your answer below: a. lim f(x)= x-1 b. lim f(x)= I-X x+2 if x < -1 f(x) = 1-x -x if x-1'
-
Given the number of deliberate threats to infromations systems of organizations how effectively can they be dealt with how can organization protext their information systems against their biggest...
-
The company received an order from a customer in Europe. Mr. Kunta, the management accountant, stated that the material used in the production of the goods is available in the warehouse - the...
-
How much CASH will the company pay related to bond interest in 2 0 2 4 ? ? Interest Payment Date Cash Payment Interest Decrease in Book Amount Dec 31, 2021 $840,000 $911,169 Dec 31, 2022 $840,000...
-
Sportique Boutique reported the following financial data for 2012 and 2011. Instructions(a) Calculate the current ratio for Sportique Boutique for 2012 and 2011.(b) Suppose that at the end of 2012,...
-
Marko Company sold spray paint equipment to Spain for 5,000,000 pesetas (P) on October 1, with payment due in six months. The exchange rates were October 1, 20X6 ...1 peseta = $0.0068 December 31,...
-
What dollar amounts in the consolidated financial statements will be incorrect if intercompany services are not eliminated?
-
Select the correct answer for each of the following items. 1. The primary focus in accounting and reporting for governmental funds is a. Income determination. b. Flow of financial resources. c....
-
Our proof of the Strong Duality Theorem, as well as the presentation of the tableau method in Section 3, depended on the fact that the dictionary and tableau methods were equivalent. More...
-
Let \(A\) be the set \(\{\alpha,\{1, \alpha\},\{3\},\{\{1,3\}\}, 3\}\). Which of the following statements are true and which are false? () . (b) {a} A. (c) {1,} CA. (d) {3,{3}} CA. (e) {1,3} A. (f)...
-
Which of the following arguments are valid? For the valid ones, write down the argument symbolically. (a) I eat chocolate if I am depressed. I am not depressed. Therefore I am not eating chocolate....
Study smarter with the SolutionInn App