Beason Manufacturing forecasts its sales next year to be $6 million and expects to earn 5 percent
Question:
Beason Manufacturing forecasts its sales next year to be $6 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):
• Current assets are equal to 20 percent of sales, and fixed assets remain at their current level of $1 million.
• Common equity is currently $0.8 million, and the firm pays out half of its after-tax earnings in dividends.
• The firm has short-term payables and trade credit that normally equal 12 percent of sales, and it has no long-term debt outstanding.
What are Beason's financing needs for the coming year?
Step by Step Answer:
Financial Management Principles and Applications
ISBN: 978-0134417219
13th edition
Authors: Sheridan Titman, Arthur J. Keown, John H. Martin