Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Okanagan Ltd. reported 2018 sales of $150,000 and earnings after tax of $15,000. Its December 31, 2018 condensed balance sheet follows. Current assets Plant and

image text in transcribed

Okanagan Ltd. reported 2018 sales of $150,000 and earnings after tax of $15,000. Its December 31, 2018 condensed balance sheet follows. Current assets Plant and equipment, net $ 90,000 100,000 Current liabilities Long-term liabilities Common shares Retained earnings Total liabilities and equity $ 55,000 35,000 40,000 60,000 $190,000 Total assets $190,000 The company always maintains a dividend payout ratio of 40%. Based on predicted economic conditions it expe 2019 sales volume to increase by 17% and its profit margin to remain the same as in 2018. Calculate the three independent scenarios below. Round all to the nearest dollar. a) Use the "Percentage of Sales method to determine the external financing required, assuming they have pla capacity. (4 marks) Increase in RE = $ RNF = $ = b) Use the "Percentage of Sales" method to determine the external financing required, assuming they do not have plant capacity. They would require a similar percentage increase in net plant and equipment to accommodate the volume increase. (2 marks) RNF = $. c) Use the "Percentage of Sales" method to determine the external financing required, assuming they do not have plant capacity. They would require a $10,000 increase in net plant and equipment to accommodate the volume increase. (2 marks) RNF = $

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

Using Financial Accounting

Authors: Carl S. Warren, Jeff Jones, Amanda Farmer

1st Edition

0357507851, 9780357507858

More Books

Students also viewed these Accounting questions