1) Antivirus Inc expects its sales next year to be $3,300,000 Inventory and accounts receivable will increase by $560,000 to accommodate this sales level The company has a steady profit margin of 8 percent with a 15 percent dividend payout 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 External funds needed $ 2) Biochemical Corp requires $520,000 in financing over the next three years The firm can borrow the funds for three years at 10 90 percent interest per year The CEO decides to do a forecast and predicts that if she utilizes short term financing instead, she will pay 7 75 percent interest in the first year, 12 50 percent interest in the second year, and 8 75 percent interest in the third year Assume interest is paid in full at the end of each year a Determine the total interest cost under each plan Interest Cost Long term fixed rate $ Short term variable rate $ b Which plan is less costly Short term variable rate plan Long term fixed rate plan 3) Garys Pipe and Steel company expects sales next year to be $1,040,000 if the economy is strong, $720,000 if the economy is steady, and $389,000 if the economy is weak Gary believes there is a 40 percent probability the economy will be strong, a 35 percent probability of a steady economy, and a 25 percent probability of a weak economy What is the expected level of sales for next year Expected level of sales $ 4) Antonio Banderos Scarves makes headwear that is very popular in the fall winter season Units sold are anticipated as October 1,800 November 2,800 December 5,600 January 4,600 14,800 units If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup However, Antonio decides to go with level production to avoid being out of merchandise He will produce the 14,800 items over four months at a level of 3,700 per month a What is the ending inventory at the end of each month Compare the unit sales to the units produced and keep a running total (Leave no cells blank be certain to enter 0 wherever required ) Ending Inventory October units November units December units January units b If the inventory costs $6 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months (Use 1 percent as the monthly rate ) (Leave no cells blank be certain to enter 0 wherever required ) Inventory Financing Cost October $ November December January Total financing cost $ 5) Sharpe Knife Company expects sales next year to be $1,710,000 if the economy is strong, $905,000 if the economy is steady, and $710,000 if the economy is weak Mr Sharpe believes there is a 40 percent probability the economy will be strong, a 35 percent probability of a steady economy, and a 25 percent probability of a weak economy What is the expected level of sales for the next year Expected level of sales 6) Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season Units sold are anticipated as follows March 4,250 April 8,250 May 13,500 June 11,500 37,500 If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise He will produce the 37,500 units over four months at a level of 9,375 per month a What is the ending inventory at the end of each month Compare the unit sales to the units produced and keep a running total (Leave no cells blank be certain to enter 0 wherever required ) Ending Inventory March units April units May units June units b If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months (Use 1 0 percent as the monthly rate ) (Leave no cells blank be certain to enter 0 wherever required ) Inventory Financing Cost March $ April May June Total financing cost $ 7) Boatler Used Cadillac Co requires $950,000 in financing over the next two years The firm can borrow the funds for two years at 12 percent interest per year Mr Boatler decides to do forecasting and predicts that if he utilizes short term financing instead, he will pay 7 75 percent interest in the first year and 13 55 percent interest in the second year Assume interest is paid in full at the end of each year a Determine the total two year interest cost under each plan Interest Cost Long term fixed rate $ Short term variable rate $ b Which plan is less costly Short term variable rate plan Long term fixed rate plan 8) Tobin Supplies Company expects sales next year to be $390,000 Inventory and accounts receivable will increase $60,000 to accommodate this sales level The company has a steady profit margin of 20 percent with a 45 percent dividend payout How much external financing will Tobin Supplies Company have to seek Assume there is no increase in liabilities other than that which will occur with the external financing External funds needed $

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1) Antivirus Inc. expects its sales next year to be $3,300,000. Inventory and accounts receivable will increase by $560,000 to accommodate this sales level. The

Antivirus Inc. expects its sales next year to be $3,300,000. Inventory and accounts receivable will increase by $560,000 to accommodate this sales level. The company has a steady profit margin of 8 percent with a 15 percent dividend payout.

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.

External funds needed

Biochemical Corp. requires $520,000 in financing over the next three years. The firm can borrow the funds for three years at 10.90 percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short-term financing instead, she will pay 7.75 percent interest in the first year, 12.50 percent interest in the second year, and 8.75 percent interest in the third year. Assume interest is paid in full at the end of each year.

a.	Determine the total interest cost under each plan.

	Interest Cost
Long-term fixed-rate	$
Short-term variable-rate	$

Which plan is less costly?

	Short-term variable-rate plan
	Long-term fixed-rate plan

Garys Pipe and Steel company expects sales next year to be $1,040,000 if the economy is strong, $720,000 if the economy is steady, and $389,000 if the economy is weak. Gary believes there is a 40 percent probability the economy will be strong, a 35 percent probability of a steady economy, and a 25 percent probability of a weak economy.

What is the expected level of sales for next year?

Expected level of sales

Antonio Banderos & Scarves makes headwear that is very popular in the fall-winter season. Units sold are anticipated as:


October	1,800
November	2,800
December	5,600
January	4,600

	14,800	units

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 14,800 items over four months at a level of 3,700 per month.

a.	What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total. (Leave no cells blank - be certain to enter "0" wherever required.)

	Ending Inventory
October	units
November	units
December	units
January	units

b.	If the inventory costs $6 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1 percent as the monthly rate.) (Leave no cells blank - be certain to enter "0" wherever required.)

	Inventory Financing Cost
October	$
November
December
January

Total financing cost	$

Sharpe Knife Company expects sales next year to be $1,710,000 if the economy is strong, $905,000 if the economy is steady, and $710,000 if the economy is weak. Mr. Sharpe believes there is a 40 percent probability the economy will be strong, a 35 percent probability of a steady economy, and a 25 percent probability of a weak economy.

What is the expected level of sales for the next year?

Expected level of sales

Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows:


March	4,250
April	8,250
May	13,500
June	11,500

	37,500

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 37,500 units over four months at a level of 9,375 per month.

a.	What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total. (Leave no cells blank - be certain to enter "0" wherever required.)

	Ending Inventory
March	units
April	units
May	units
June	units

b.	If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1.0 percent as the monthly rate.) (Leave no cells blank - be certain to enter "0" wherever required.)

	Inventory Financing Cost
March	$
April
May
June

Total financing cost	$

Boatler Used Cadillac Co. requires $950,000 in financing over the next two years. The firm can borrow the funds for two years at 12 percent interest per year. Mr. Boatler decides to do forecasting and predicts that if he utilizes short-term financing instead, he will pay 7.75 percent interest in the first year and 13.55 percent interest in the second year. Assume interest is paid in full at the end of each year.

a.	Determine the total two-year interest cost under each plan.

	Interest Cost
Long-term fixed-rate	$
Short-term variable-rate	$

Which plan is less costly?

	Short-term variable-rate plan
	Long-term fixed-rate plan

Tobin Supplies Company expects sales next year to be $390,000. Inventory and accounts receivable will increase $60,000 to accommodate this sales level. The company has a steady profit margin of 20 percent with a 45 percent dividend payout.

How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.

External funds needed