2 Carter Corporation's sales are expected to increase from $5 million in 2005 to $6 million in 2006, or by 20%. Its assets totaled $4 million at the end of 2005. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2005, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. The after-tax profit margin is forecasted to be 7%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast Carter's additional funds needed for the coming year. Round your answer to two decimal places. Problem 3 AFN equation Carter Corporation's sales are expected to increase from $5 million in 2005 to $6 million in 2006, or by 20%. Its assets totaled $5 million at the end of 2005. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2005, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. The after-tax profit margin is forecasted to be 3%, and the forecasted retention ratio is 25%. Use the AFN equation to forecast Carter's additional funds needed for the coming year. Round your answer to two decimal places. Problem 4 Carter Corporation's sales are expected to increase from $5 million in 2005 to $6 million in 2006, or by 20%. Its assets totaled $3 million at the end of 2005. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2005, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. The after-tax profit margin is forecasted to be 7%, and the forecasted retention ratio is 35%. Assume that the company had $3 million in assets at the end of 2005. However, assume that the company pays no dividends. a. Under these assumptions, what would be the additional funds needed for the coming year? Round your answer to two decimal places. Problem 5 Austin Grocers recently reported the following income statement (in millions of dollars): Sales $700 Operating costs including depreciation 500 EBIT $200 Interest 40 EBT $160 Taxes (40%) 64 Net income $96 Dividends $32 Addition to retained earnings $64 This year the company is forecasting a 35% increase in sales, and it expects that its year-end operating costs including depreciation will equal 75% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant. b. What is the expected growth rate in Austin's dividends? Round your answer to two decimal places. Problem 6 Walter Industries has $4 billion in sales and $1.1 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity. a. What level of sales could Walter Industries have obtained if it had been operating at full capacity? Round your answer to two decimal places. b. What is Walter's target fixed assets/sales ratio? Round your answer to two decimal places. % c. If Walter's sales increase 13%, how large of an increase in fixed assets would the company need in order to meet its target fixed assets/sales ratio? Round your answer to two decimal places. Problem 7 Jasper Furnishings has $300 million in sales. The company expects that its sales will increase 14% this year. Jasper's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. On the basis of recent history, the estimated relationship between inventories and sales (in millions of dollars) is shown below. Inventories = 30 + 0.220(Sales) a. Given the estimated sales forecast and the estimated relationship between inventories and sales, what are your forecasts of the company's year-end inventory level? Round your answer to two decimal places. million b. What are your forecasts of the company's year-end inventory turnover ratio? Round your answer to two decimal places. Problem 8 At year-end 2008, total assets for Ambrose Inc. were $1.8 million and accounts payable were $340,000. Sales, which in 2008 were $2.1 million, are expected to increase by 20% in 2009. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Ambrose typically uses no current liabilities other than accounts payable. Common stock amounted to $395,000 in 2008, and retained earnings were $250,000. Ambrose plans to sell new common stock in the amount of $135,000. The firm's profit margin on sales is 4%; 55% of earnings will be retained. a. What was Ambrose's total debt in 2008? Round your answer to two decimal places. b. How much new, long-term debt financing will be needed in 2009? Round your answer to two decimal places. (Hint: AFN - New stock = New long-term debt.) Problem 9 Pierce Furnishings generated $2.0 million in sales during 2008, and its year-end total assets were $1.5 million. Also, at year-end 2008, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2009, the company estimates that its assets must increase by 75 cents for every $1 increase in sales. Pierce's profit margin is 7%, and its retention ratio is 40%. How large a sales increase can the company achieve without having to raise funds externally? Round your answer to two decimal places. Problem 10 Edwards Industries has $410 million in sales. The company expects that its sales will increase 8% this year. Edwards' CFO uses a simple linear regression to forecast the company's receivables level for a given level of projected sales. On the basis of recent history, the estimated relationship between receivables and sales (in millions of dollars) is shown below. Receivables = $11.25 + 0.10(Sales) a. Given the estimated sales forecast and the estimated relationship between receivables and sales, what are your forecasts of the company's year-end balance for receivables? Round your answer to two decimal places. million b. What are your forecasts of the company's year-end days sales outstanding (DSO) ratio? Assume that DSO is calculated on the basis of a 365-day year. Round your answer to two decimal places. days