Question 3 (4 points) Joe's Construction Ltd. is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars). (4 Marks) Peak Off-peak Cash $ 50 $ 30 Marketable securities 0 20 Accounts receivable 40 20 Inventories 100 50 Net fixed assets 500 500 Total assets $690 $620 Spontaneous liabilities Short-term bank debt Long-term debt Common equity Total claims $ 30 50 300 310 $690 $ 10 0 300 310 $620 What type of working capital policy does Joe's Construction likely follow? Briefly explain. Question 6 (9 points) Problem 1 (9 Marks) Lothbrok Industries expects to reach a sales level of $324 million for next year. The company expects to continue paying the same dividend per share for the next several years. a. Calculate the additional financing, if any, the firm will need over the next year in order to achieve sales of $324 million. Assume all assets vary with sales, all ratios remain constant and that any debt or borrowing is non-spontaneous financing. (4 marks) b. Suppose that the firm's management feels that the average collection period on its additional sales --that is, sales over $270 million will be 38 days, instead of the current level. By what amount will the increase in the average collection period increase the financing needed by the firm over the Question 3 (4 points) Joe's Construction Ltd. is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars). (4 Marks) Peak Off-peak Cash $ 50 $ 30 Marketable securities 0 20 Accounts receivable 40 20 Inventories 100 50 Net fixed assets 500 500 Total assets $690 $620 Spontaneous liabilities Short-term bank debt Long-term debt Common equity Total claims $ 30 50 300 310 $690 $ 10 0 300 310 $620 What type of working capital policy does Joe's Construction likely follow? Briefly explain. Question 6 (9 points) Problem 1 (9 Marks) Lothbrok Industries expects to reach a sales level of $324 million for next year. The company expects to continue paying the same dividend per share for the next several years. a. Calculate the additional financing, if any, the firm will need over the next year in order to achieve sales of $324 million. Assume all assets vary with sales, all ratios remain constant and that any debt or borrowing is non-spontaneous financing. (4 marks) b. Suppose that the firm's management feels that the average collection period on its additional sales --that is, sales over $270 million will be 38 days, instead of the current level. By what amount will the increase in the average collection period increase the financing needed by the firm over the
