Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. Problem 16.08 (Long-Term Financing Needed) eBook Problem Walk-Through At year-end 2019, total assets for Arrington Inc. were $1.4 million and accounts payable were $315,000.

image text in transcribed

2. Problem 16.08 (Long-Term Financing Needed) eBook Problem Walk-Through At year-end 2019, total assets for Arrington Inc. were $1.4 million and accounts payable were $315,000. Sales, which in 2019 were $2.40 million, are expected to increase by 20% in 2020. 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. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $435,000 in 2019, and retained earnings were $465,000. Arrington plans to sell new common stock in the amount of $160,000. The firm's profit margin on sales is 3%; 55% of earnings will be retained. a. What were Arrington's total liabilities in 2019? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. $ 0 b. How much new long-term debt financing will be needed in 2020? (Hint: AFN - New stock = New long-term debt.) Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. $

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 Markets And Institutions

Authors: Jeff Madura

13th Edition

0357130790, 978-0357130797

More Books

Students also viewed these Finance questions