PART 1 - INTERNAL SOURCES OF FUNDING The management of Yates Motors is considering investing $950,000 to purchase a Hyundai dealership and expand operations in Barrie. Last year's financial figures are as follows: Prior Year - Financials Revenues 1.850,000 Tutalipers 1,550,000 Aarets Current assets Casti Accounts Receivable Inventory Total current assets Net Income 300,000 40,000 90,000 400,000 530,000 Long term Assets Building equipment 800,000 310,000 Next year the company expects sales to increase by 80% due to the expansion. The return on sales is expected to fall to 11.5% due to the initial set up costs. Management also expects there to be changes in the working capital accounts on the balance sheet. . Due to increased sales with the new dealership, average accounts receivable is expected to increase to $160,000 - a total increase of $70,000 on last year. TOTAL ASSETS 1.640,000 Liabilities and Equity Current liabilities Accounts Payable Working Capital Loan Total Current liabines . Again due to the expansion, Yates' expects to take on more inventory next year. They expect it to increase by $125,000 to $525,000. 100,000 135,000 215,000 Long term debts TOTAL DEBTS 645,000 330,000 Shareholders Equity Common Shares Retained earnings TOTAL SHAREHOLDERS EQUITY 300,000 400,000 160,000 1,640.000 TOTAL SHAREHOLDERS EQUITY and LABILITIES Questions 1. What was the company's return on total assets last year? (2 marks) 2. How much cash will internal operations provide (ie. what is generated by net income and changes in A/R, inventory etc.)? ( 3 marks) 3. How much will the company have to raise from external sources to continue with an investment of 950,000 in capital assets? (2 marks)