1. Commonwealth Construction (CC) needs $2 million of assets to get started, and it expects to have a basic earning power ratio of 15%. CC will own no securities, so all of its income will be operating income. If it so chooses, CC can finance up to 60% of its assets with debt, which will have an 9% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a 30% tax rate on all taxable income, what is the difference between CC's expected ROE if it finances these assets with 60% debt versus its expected ROE if it finances these assets entirely with common stock? Round your answer to two decimal places.%__________

2.The Stewart Company has $1,161,500 in current assets and $464,600 in current liabilities. Its initial inventory level is $232,300, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.0? Round your answer to the nearest cent. $_____________

3.Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $2 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 6%, and the forecasted retention ratio is 40%. Use the AFN equation to forecast the additional funds Carlsbad will need for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.$__________________

4.Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $5 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and the forecasted retention ratio is 25%. Use the AFN equation to forecast Carlsbad's additional funds needed for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent. $___________ Now assume the company's assets totaled $3 million at the end of 2016. Is the company's "capital intensity" the same or different comparing to initial situation?-Select Different OR The same

5.Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $3 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 3%.

a. Assume that the company pays no dividends.

Under these assumptions, what would be the additional funds needed for the coming year? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.

$____________

b. Why is this AFN different from the one when the company pays dividends?

I. Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed.

II. Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed.

III. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed.

IV. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed.

V. Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed.

-Select-I ,II ,III, IV, or, V

6.Williamson Industries has $6 billion in sales and $2.7 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity.

a. What level of sales could Williamson Industries have obtained if it had been operating at full capacity? Write out your answer completely. For example, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent.

$__________

b. What is Williamson's target fixed assets/sales ratio? Round your answer to two decimal places.

%__________

c. If Williamson's sales increase 8%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer completely. For example, 25 billion should be entered as 25,000,000,000. Round your answer to the nearest cent. Negative amount should be indicated by a minus sign. Do not round intermediate calculations.

$___________

7.At year-end 2016, total assets for Arrington Inc. were $1.7 million and accounts payable were $390,000. Sales, which in 2016 were $2.7 million, are expected to increase by 25% in 2017. 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 $410,000 in 2016, and retained earnings were $225,000. Arrington plans to sell new common stock in the amount of $150,000. The firm's profit margin on sales is 6%; 40% of earnings will be retained.

a. What were Arrington's total liabilities in 2016? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent.

$____________

b. How much new long-term debt financing will be needed in 2017? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round your intermediate calculations. Round your answer to the nearest cent. (Hint:AFN - New stock = New long-term debt.)

$______________

8.Paladin Furnishings generated $2 million in sales during 2016, and its year-end total assets were $1.3 million. Also, at year-end 2016, 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 2017, the company estimates that its assets must increase by $0.65 for every $1.00 increase in sales. Paladin's profit margin is 5%, and its retention ratio is 50%. How large of a sales increase can the company achieve without having to raise funds externally? 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.

$____________

9.Earleton Manufacturing Company has $3 billion in sales and $900,000,000 in fixed assets. Currently, the company's fixed assets are operating at 80% of capacity.

a. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answer completely. Round your answer to the nearest whole number.

$________________

b. What is Earleton's target fixed assets/sales ratio? Do not round intermediate calculations. Round your answer to two decimal places.

%________________

c. If Earleton's sales increase 30%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer completely. Do not round intermediate calculations. Round your answer to the nearest whole number.

$_________________

10.Austin Grocers recently reported the following 2016 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

For the coming year, the company is forecasting a 35% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 65% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant.

a. What is Austin's projected 2017 net income? Enter your answer in millions. For example, an answer of $13,000,000 should be entered as 13. Round your answer to two decimal places.

$_________million

b. What is the expected growth rate in Austin's dividends? Do not round your intermediate calculations. Round your answer to two decimal places.

%___________