Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Below is the financial data for Micron Technologies ( ticker: MU ) . You are the firm's CFO. A consultant told you that your Current

Below is the financial data for Micron Technologies (ticker: MU). You are the firm's CFO. A consultant told you that your Current Ratio was too high. They explain that shorterterm assets earn lower returns than longer-term assets. As a result, you have come up with a plan to immediately collect $2 billion ( $2,000 in millions) of Accounts Receivables and deplete cash by another $2 billion ( $2,000 in millions). You plan to invest $2.25 billion ( $2,250 in millions) in long-term assets, pay a special dividend of $1 billion ( $1,000 in millions) to shareholders, pay down Accounts Payable by $500 million, and then pay down $250 million of Accrued Expenses and Other Current Liabilities immediately. You are not paying down Accounts Payable more because it is free credit for MU. What is the new Current Ratio if these ideas are implemented? (HINTS: Take a deep breath. What is the formula for the Current Ratio? How do each of these moves impact the numerator and denominator?)
2.4162
21335
2.6191
image text in transcribed

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_2

Step: 3

blur-text-image_3

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

Shape Up Your Finances The Personal Finances Handbook

Authors: Ian Birt

1st Edition

0734608268, 978-0734608260

More Books

Students also viewed these Finance questions