Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

I did part a just need help with part b please *See income statement. b. Below is some additional information on Garlington: Garlington Technologies Inc.'s

I did part a just need help with part b please

image text in transcribedimage text in transcribed

image text in transcribed

image text in transcribed

image text in transcribed *See income statement. b. Below is some additional information on Garlington: Garlington Technologies Inc.'s 2021 financial statements are shown below. Return on equity = % Earnings per share =$ Dividends per share =$ II. Because of an agreement with their lender, Garlington's current ratio cannot drop below 1.7 or it will violate a debt covenant. How much can the company increase its notes payable and still not violate its minimum current ratio? Increase in notes payable =$ III. Assume that Garlington increases its notes payable to the maximum allowed under its current ratio restriction and issues stock (at the beginning of the year) to raise the remaining funds required. Calculate the company's ROE, EPS, and DPS. ROE =% EPS=$ DPS =$ IV. Recalculate Garlington's ROE, EPS, and DPS if all the additional financing was obtained through the sale of new common stock. ROE=% EPS=$ b. Below is some additional information on Garlington: I. Calculate the company's 2022 current ratio, ROE, EPS, and DPS based on the expansion and financing as in part a. Current ratio =x Return on equity =% Earnings per share =$ Dividends per share =$ II. Because of an agreement with their lender, Garlington's current ratio cannot drop below 1.7 or it will violate a debt covenant. How much can the company increase its notes payable and still not violate its minimum current ratio? Increase in notes payable =$ III. Assume that Garlington increases its notes payable to the maximum allowed under its current ratio restriction and issues stock (at the beginning of the year) to raise the remaining funds required. Calculate the company's ROE, EPS, and DPS. a. Suppose that in 2022 sales increase by 10% over 2021 sales and that 2022 dividends will increase to $112,000. Construct the pro forma financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2021 . Use an interest rate of 13%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the AFN will be in the form of notes payable

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions