Question
Question 2. Capital budgeting with percentage of sales method The Minoso Corporation anticipates a 20 percent increase in sales for 2014 over its 2013 level.
Question 2. Capital budgeting with percentage of sales method
The Minoso Corporation anticipates a 20 percent increase in sales for 2014 over its 2013 level. Minoso is currently operating at full capacity and thus expects to increase its investment in both current and fixed assets in order to support the increase in forecasted sales.
Minoso CorporationIncome Statement for December 31, 2013
(Thousands of Dollars)
_________________________________
Sales $15,000
Operating expenses -13,000
EBIT 2,000
Interest 400EBT 1,600
Taxes (40%) 640
Net income 960
Cash dividends (40%) 384
Added retained earnings $576
Balance Sheet as of December 31, 2013
(Thousands of Dollars)
______________________________________________________________________________
Cash $ 1,000 Accounts payable $ 1,600
Accounts receivable 2,000 Bank Loan 1,800
Inventories 2,200 Accrued liabilities 1,200
Total current assets 5,200 Total current liabilities 4,600
Long-term debt 2,200
Fixed assets, net 6,800 Common stock 2,400
Total assets $12,000 Retained earnings 2,800
Total liabilities & equity $12,000 ______________________________________________________________________________
Estimate the additional funds needed (AFN) for 2013 using the formula or equation method that is based on constant percent of sales relationships.
| Current | Net sales | NS0 | ? |
| Total assets | TA0 | ? | |
| Accounts payable | AP0 | ? | |
| Accrued liabilities | AL0 | ? | |
| Net Income | NI0 | ||
| Retention ratio | RR0 | ? | |
| Next period | Sales growth rate | g | 20% |
| NS1 | NS0 * (1+g) | ? | |
| Change | NS1 - NS0 | NS | ? |
| AFN | Change in TA, or TA | (TA0 / NS0) * NS | ? |
| (AP + AL) | ((AP0 + AL0)/ NS0) * NS | ? | |
| addition to retained earnings | (NS1 * (NI0 / NS0) * RR0) | ? | |
| (TA) - (AP+AL) - (addition to Retained earnings) | ? |
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Options Futures and Other Derivatives
Authors: John C. Hull
10th edition
013447208X, 978-0134472089
