Busn602 Week 7
Busn602 Week 7
1.Problem 15-4 Average Sales Forecast (LG15-3)
Suppose a firm has had the following historic sales figures.
| Year: | 2012 | 2013 | 2014 | 2015 | 2016 |
| Sales | $2,500,000 | $3,750,000 | $2,400,000 | $2,000,000 | $2,600,000 |
What would be the forecast for next year’s sales using the average approach?
2. Problem 15-6 Additional Funds Needed (LG15-4)
Suppose that Wind Em Corp. currently has the balance sheet shown below, and that sales for the year just ended were $6.7 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $7.7 million next year.
| Assets | Liabilities and Equity | |||||||
| Current assets | $ | 1,799,000 | Current liabilities | $ | 2,144,670 | |||
| Fixed assets | 4,700,000 | Long-term debt | 1,650,000 | |||||
| Equity | 2,704,330 | |||||||
| Total assets | $ | 6,499,000 | Total liabilities and equity | $ | 6,499,000 | |||
If all assets and current liabilities are expected to grow with sales, what amount of additional funds will Wind Em need from external sources to fund the expected growth? (Enter your answer in dollars not in millions.)
3. Problem 14-5 Average Payment Period (LG14-3)
Assume a firm has a cash cycle of 62 days and an operating cycle of 94 days. What is its average payment period?
4. Problem 14-7 Payables Turnover (LG14-3)
Assume a firm has a cash cycle of 73 days and an operating cycle of 127 days. What is its payables turnover? (Use 365 days a year. Round your answer to 2 decimal places.)
5.Problem 16-2 Capital Structure Weights (LG16-3)
Suppose that Papa Bell, Inc.’s equity is currently selling for $52 per share, with 3.7 million shares outstanding. Assume the firm also has 14,000 bonds outstanding, and they are selling at 95 percent of par. What are the firm’s current capital structure weights? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| Capital Structure Weights | ||
| Equity | % | |
| Debt |
6. Problem 18-06 Calculating Costs of Issuing Debt (LG18-4)
Harper’s Dog Pens, Inc. with the help of its investment bank, recently issued $200.9 million of new debt. The offer price on the debt was $1,000 per bond and the underwriter’s spread was 5 percent of the gross proceeds.
Calculate the amount of capital funding Harper’s Dog Pens raised through this bond issue. (Enter your answer in dollars not in millions.)
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7. Problem 18-03 Calculating Costs of Issuing Stock (LG18-4)
Husker’s Tuxedo’s, Inc. needs to raise $255 million to finance its plan for nationwide expansion. In discussions with its investment bank, Husker’s learns that the bankers recommend an offer price (or gross price) of $45 per share and they will charge an underwriter’s spread of $2.00 per share.
Calculate the net proceeds per share to Husker’s from the sale of stock. (Round your answer to 2 decimal places.)
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How many shares of stock will Husker’s need to sell in order to receive the $255 million needed? (Round your final answer to the nearest whole number.)
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8. Problem 18-04 Calculating Costs of Issuing Stock (LG18-4)
Don’s Captain Morgan, Inc. needs to raise $13.00 million to finance plant expansion. In discussions with its investment bank, Don’s learns that the bankers recommend an offer price (or gross proceeds) of $20.90 per share and Don’s will receive $18.65 per share.
Calculate the underwriter’s spread per share on the issue. (Round your answer to 2 decimal places.)
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How many shares of stock will Don’s need to sell in order to receive the $13.00 million it needs? (Round your answer to the nearest whole number.)
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9. Problem 17-4 Total Dividend Amount (LG17-2)
Suppose a firm has a retention ratio of 54 percent and net income of $8.8 million. How much does it pay out in dividends? (Enter your answer in dollars not in millions.)
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10. Problem 17-7 Stock Dividend Effects (LG17-6)
If a firm has retained earnings of $3.5 million, a common shares account of $5.5 million, and additional paid-in capital of $11.0 million, how would these accounts change in response to a 10 percent stock dividend? Assume market value of equity is equal to book value of equity. (Enter your answers in dollars not in millions. Input all amounts as positive values. Indicate the direction of the effect by selecting “increase,” “decrease,” or “no change” from the drop-down menu.)
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11. Problem 17-2 Payout Ratio (LG17-2)
Suppose a firm pays total dividends of $1,500,000 out of net income of $6.0 million. What would the firm’s payout ratio be? (Round your answer to 2 decimal places.)
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