Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 ABC Inc. is a juice producer which has been growing steadily for the past 5 years. According to the expected market demand, the company

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
1 ABC Inc. is a juice producer which has been growing steadily for the past 5 years. According to the expected market demand, the company is planning to grow its sales at 15% next year. Since the company is currently operating at full capacity, fixed assets will also grow proportional to sales, same as current assets and current liabilities. However, long-term debt and equity will not grow proportional to sales but rather management will decide upon their next year level based on an acceptable level of debt to equity ratio as well as ROE ratio. The company has a dividend pay-out ratio of 40%, which the management want to maintain in order to meet the shareholders' expectations. Below are the financial statements of ABC Inc. for the year ending Sept 2020. 1) Determine the value of the "External money needed" for next year. (Do not round intermediate calculations. Round the final answer to 2 decimal places, Omit commas, spaces and $ sign) (10 Points) ABC's Balance Sheet Amounts in 000's ABC Inc, Income statement Amounts in 000's Sep-20 Sales 5,700 Costs 4,200 Taxable income 1,500 Taxes (34%) 510 Net Income 990 Cash Accounts Receivables Inventory Current assets Fixed assets Total Assets Sep-20 Sep-20 200 Accounts Payable 2,000 1,600 Accrued Expenses 200 2,100 Current liabilities 2,200 3,900 Long-term debt 3,750 8,100 Equity 6,050 12,000 Total Liab & Equity 12,000 Enter your answer oduction to Managerial Finance) 8 In addition to the planned 15% growth of the next year, the company is considering a future mega project of introducing a new entire production line that can increase its market share by 5%. The company is planning for this expansion to take place four years from today when the company's production team is better prepared for such a leap in production. The total investment cost of this project is $3M and the company wants to finance it by 50% debt and 50% equity 8) How much does the company need to save every year, for the coming four years, to raise $1.5M, if its saving account earns an interest rate of 4%? (Do not round intermediate calculations. Round the final answer to 2 decimal places, Omit commas, spaces and 5 sign) (10 Points) 9 If the company cannot save more than $250,000 per year, how much would it be able to raise in 4 years time (given an interest rate on saving account of 4%). (Do not round intermediate calculations. Round the final answer to 2 decimal places, do not leave spaces, Omit commas, spaces or $ sign) (10 Points) Carr 10 How long would it take the company to cover the required $1.5M if it saves $250,000 a year? (In the space below write down the number of years and round your answer to two decimal places) (10 Points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Derivative Investments An Introduction To Structured Products

Authors: Richard D. Bateson

1st Edition

1848167113, 9781848167117

More Books

Students also viewed these Finance questions

Question

Define an unfair labor practice and provide three or four examples.

Answered: 1 week ago