Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cold Duck Manufacturing Inc. has the following end-of-year balance sheet: Cold Duck Manufacturing Inc. Balance Sheet For the Year Ended on December 31 Assets Liabilities

Cold Duck Manufacturing Inc. has the following end-of-year balance sheet: Cold Duck Manufacturing Inc. Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents $150,000 Accounts payable $250,000 Accounts receivable 400,000 Accrued liabilities 150,000 Inventories 350,000 Notes payable 100,000 Total Current Assets $900,000 Total Current Liabilities $500,000 Net Fixed Assets: Long-Term Bonds 1,000,000 Net plant and equipment $2,100,000 Total Debt $1,500,000 (cost minus depreciation) Common Equity Common stock 800,000 Retained earnings 700,000 Total Common Equity $1,500,000 Total Assets $3,000,000 Total Liabilities and Equity $3,000,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Cold Duck Manufacturing Inc. generated $300,000 net income on sales of $13,000,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 45%. Suppose Cold Duck Manufacturing Inc.s assets are fully utilized.

Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Cold Duck Manufacturing Inc.s expected sales. (Note: Do not round intermediate calculations.) $567,000 $513,000 $432,000 $540,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital.

How much of the total increase in assets will be supplied by spontaneous liabilities for Cold Duck Manufacturing Inc. this year? (Note: Do not round intermediate calculations.) $57,600 $72,000 $75,600 $68,400 In addition, Cold Duck Manufacturing Inc. is expected to generate net income this year.

The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment.

Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firms profit margin and dividend payout ratio are expected to remain constant.

Given the preceding information, Cold Duck Manufacturing Inc. is expected to generate $ from operations that will be added to retained earnings. (Note: Do not round intermediate calculations.)

According to the AFN equation and projections for Cold Duck Manufacturing Inc., the firms AFN is $ . (Note: Do not round intermediate calculations.)

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

Crypto Spotlight Series The Graph

Authors: Nott U.r. Keys

1st Edition

979-8854247733

More Books

Students also viewed these Finance questions

Question

=+ What is producer surplus?

Answered: 1 week ago

Question

1.The difference between climate and weather?

Answered: 1 week ago

Question

1. What is Fog ?

Answered: 1 week ago

Question

How water vapour forms ?

Answered: 1 week ago

Question

What is Entrepreneur?

Answered: 1 week ago

Question

Which period is known as the chalolithic age ?

Answered: 1 week ago