Question 6

Assume that Lothbrok Industries follows a residual dividend policy and therefore wants to maintain its current debt to equity ratio of 0.38. Assume that the company has $8 million in new capital projects for the current year. Based on Lothbrok's 2019 net income and any other required information, which is contained on the pages of Lothbrok's financial statements (question 1), how much additional debt, if any, will Lothbrok have to take on to finance these new capital projects? Calculationsrequired.

Question 7

Assume Lothbrok wishes to maintain the same dividend per share as paid out in 2019, maintain its current debt to equity ratio of 0.38 and does not wish to issue new shares. Based on Lothbrok's 2019 net income and any other required information, which is contained on the pages of Lothbrok's financial statements (question 1), calculate the total available for capital projects next year?

Lothbrok Industries Ltd. Income Statement (millions Canadian Dollars) Revenue Cost Of Goods Sold Gross Profit Selling General & Admin Expense Depreciation Operating Income Interest Expense Earnings Before Tax Income Tax Expense Net Income 2018 259 150 109 68 8 33 3 30 8 22 2019 270 153 117 74 11 32 6 26 8 18 Per Share Items EPS Common Shares Outstanding (millions) Dividends per Share 0.51 43.5 SO.14 $0.41 44.1 $0.15 2018 2019 Lothbrok Industries Ltd. Balance Sheet, (millions Canadian Dollars) ASSETS Cash And Equivalents Accounts Receivable Inventory Prepaid Expense Total Current Assets Gross Property, Plant & Equipment Accumulated Depreciation Net Property, Plant & Equipment Other Non-operating Assets Total Assets 21 116 3 140 230 (88.3) 142 50 332 21 120 4 145 244 (86) 158 52 355 25 26 LIABILITIES Accounts Payable Accrued Expense Short-term Debt Other Current Liabilities Total Current Liabilities Long-Term Debt Other Non-Current Liabilities Total Liabilities 8 27 10 70 76 19 165 37 14 77 70 26 173 Total Equity Total Liabilities And Equity 167 332 182 355