3 questions
1. What is the amount of external financing needed, assuming the company is operating at full capacity? Assume
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Sales
grow at 10% and Dividend Payout Rate = 50%.
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Tasha’s Toy Emporium
Income Statement, 2009
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Current
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Pro Forma
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Sales
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5,000
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Less: costs
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–
3,000
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EBT
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2,000
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Less: taxes (40% of EBT)
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-800
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Net Income
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1,200
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Dividends
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600
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Add. To RE
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600
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Tasha’s Toy Emporium – Balance Sheet
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Current
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Pro Forma
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Current
Pro Forma
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ASSETS
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Liabilities &
Owners’ Equity
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Current Assets
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Current Liabilities
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Cash
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$500
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A/P
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$900
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A/R
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2,000
N/P
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2,500
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Inventory
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3,000
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Total
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3,400
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Total
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5,500
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LT Debt
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2,000
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Fixed Assets
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Owners’ Equity
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Net PP&E
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4,000
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CS & APIC
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2,000
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Total Assets
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9,500
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RE
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2,100
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Total
4,100
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Total L & OE
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9,500
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EFN
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Plug Variable
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Chapter 11
1. Cantor’s has been busy analyzing a new product. Thus far, management has determined that an OCF of $218,200 will result in a zero net present value for the project, which is the minimum requirement for project acceptance. The fixed costs are $329,000 and the contribution margin per unit is $216.40. The company feels that it can realistically capture 2.5 percent of the 110,000 unit market for this product. The tax rate is 34 percent and the required rate of return is 11 percent. Should the company develop the new product? Why or why not?
2. Tucker’s Trucking is considering a project with a discounted payback period just equal to the project’s life. The projections include a sales price of $38, variable cost per unit of $18.50, and fixed costs of $32,000. The operating cash flow is $19,700. What is the break-even quantity?
1
.
What is the amount of external financing needed, assuming the company is operating at full
capacity?
Assume Sales grow at 10%
and Dividend
Payout Rate = 50%
.
Tasha’s Toy Emporium
Income Statement, 2009
Current
Pro Forma
Sales
5,000
Less: costs
–
3,000
EBT
2,000
Less: taxes
(40% of EBT)
–
800
Net Income
1,200
Dividends
600
Add. To RE
600
Tasha’s Toy Emporium
–
Balance Sheet
Current
Pro Forma
Current
Pro Forma
ASSETS
Liabilities &
Owners’
Equity
Current
Assets
Current
Liabilities
Cash
$500
A/P
$900
A/R
2,000
N/P
2,500
Inventory
3,000
Total
3,400
Total
5,500
LT Debt
2,000
Fixed Assets
Owners’
Equity
Net PP&E
4,000
CS & APIC
2,000
Total Assets
9,500
RE
2,100
Total
4,100
Total L & OE
9,500
EFN
Plug
Variable
1. What is the amount of external financing needed, assuming the company is operating at full
capacity? Assume Sales grow at 10% and Dividend Payout Rate = 50%.
Tasha’s Toy Emporium
Income Statement, 2009
Current Pro Forma
Sales 5,000
Less: costs -3,000
EBT 2,000
Less: taxes
(40% of EBT) -800
Net Income 1,200
Dividends 600
Add. To RE 600
Tasha’s Toy Emporium – Balance Sheet
Current Pro Forma Current Pro Forma
ASSETS
Liabilities &
Owners’
Equity
Current
Assets
Current
Liabilities
Cash $500 A/P $900
A/R 2,000 N/P 2,500
Inventory 3,000 Total 3,400
Total 5,500 LT Debt 2,000
Fixed Assets
Owners’
Equity
Net PP&E 4,000 CS & APIC 2,000
Total Assets 9,500 RE 2,100
Total 4,100
Total L & OE 9,500
EFN
Plug Variable
