Maldives Commercial Enterprises projects its sales next year to be Rf5 million (in Maldivian rufiyaa) and expects
Question:
Maldives Commercial Enterprises projects its sales next year to be Rf5 million (in Maldivian rufiyaa) and expects to earn 6 percent of that amount after taxes. The firm is currently in the process of projecting its financing needs and has made the following assumptions (projections):
1. Current assets will equal 25 percent of sales, and fixed assets will remain at the current level of Rf1.2 million.
2. Common equity is currently Rf1 million, and the firm pays out half its after-tax earnings in dividends.
3. The firm has short-term payables and trade credit that normally equal 15 percent of sales, and it has no longterm debt outstanding.
What are Maldives Commercial’s financing requirements (that is, total assets) and discretionary financing needs (DFN) for the coming year?
Step by Step Answer:
Foundations Of Finance
ISBN: 9781292318738
10th Global Edition
Authors: Arthur Keown, John Martin, J. Petty