duction to Managerial Finance) Hi Somandeep Kaur, when you submit this form, the owner will be able to see your name and email address ABC Inc. is a juice producer which has been growing steadily for the past 5 years. According to the expected market demand, the company is planning to grow its sales at 15% next year. Since the company is currently operating at full capacity, fixed assets will also grow proportional to sales, same as current assets and current liabilities. However, long-term debt and equity will not grow proportional to sales but rather management will decide upon their next year level based on an acceptable level of debt to equity ratio as well as ROE ratio. The company has a dividend pay-out ratio of 40%, which the management want to maintain in order to meet the shareholders' expectations. Below are the financial statements of ABC Inc. for the year ending Sept 2020. 1) Determine the value of the "External money needed" for next year. (Do not round intermediate calculations. Round the final answer to 2 decimal places, Omit commas, spaces and $ sign) (10 points) ABC's Balance Sheet Amounts in 000's ABC Inc. Income statement Amounts in 000's Sep-20 Sales 5,700 Costs 4,200 Taxable income 1,500 Taxes (34%) 510 Net Income 990 Cash Accounts Receivables Inventory Current assets Fixed assets Total Assets Sep-20 Sep-20 200 Accounts Payable 2,000 1,600 Accrued Expenses 200 2,100 Current liabilities 2,200 3,900 Long-term debt 3,750 8.100 Equity 6,050 12,000 Total Liab & Equity 12,000 Enter your answer oduction to Managerial Finance) What would be the impact on ROE & Debt Equity ratios if the company decides to cover the "external money needed" by raising debt? (In the space below calculate and write down the current ROE & debt/equity ratios, and then calculate and write down both ratios after raising debt to cover the external money needed next year). (10 Points) Enter your answer 3 What would be the impact on ROE & Debt Equity Ratio if the company decides to cover the "external money needed" by raising new equity? (In the space below calculate and write down the ROE & debt/equity ratios after raising new equity to cover the extemal money needed next year) (10 points) Enter your answer Comment on your answers to questions (2) & (3), how would an increase in debt or equity impact the ROE and debt to equity ratios? (8 Points) O oduction to Managerial Finance) 8 In addition to the planned 15% growth of the next year, the company is considering a future mega project of introducing a new entire production line that can increase its market share by 5%. The company is planning for this expansion to take place four years from today when the company's production team is better prepared for such a leap in production. The total investment cost of this project is $3M, and the company wants to finance it by 50% debt and 50% equity 8) How much does the company need to save every year, for the coming four years, to raise $1.5M, if its saving account earns an interest rate of 4%? (Do not round intermediate calculations, Round the final answer to 2 decimal places, Omit commas, spaces and $ sign) (10 points) Enter your answer If the company cannot save more than $250,000 per year, how much would it be able to raise in 4 years time (given an interest rate on saving account of 4%). (Do not round intermediate calculations. Round the final answer to 2 decimal places, do not leave spaces, Omit commas, spaces or $ sign) (10 points) (10 Points) Enter your answer 10 How long would it take the company to cover the required $1.5M if it saves $250,000 a year? (In the space below write down the number of years and round your answer to two decimal places) (10 Points) Enter your answer Submit This content is created by the owner of the form. The data you submit will be sent to the form owner. Never give out your password. Powered by Microsoft Forms Privacy and cookies | Terms of use