A firm's most recent financial statements are as follows (in millions of dollars). Balance Sheet Assets...

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A firm's most recent financial statements are as follows (in millions of dollars). Balance Sheet Assets Cash $0.5 Accounts Receivable 0.7 Inventory 0.4 Current Assets 1.6 Net Fixed Assets Total Notes Payable Current Liabilities 2.5 Long-term Debt Common Equity Total 4.1 Liabilities and Equity Accounts Payable Accrued Liabilities Income Statement Sales Cost of Goods Sold Gross Profit Operating Expenses Net Operating Income Interest Expenses Earnings before Taxes Income Taxes Net Income $ 10.0 6.6 3.4 2.1 1.3 0.3 1.0 0.4 0.6 $0.4 0.2 0.3 0.9 1.7 1.5 4.1 The management believes that sales will increase by 20 percent this year. The dividend payout ratio (Dividends / Net income) is targeted at 40 percent. The tax rate is 40%. Costs, other expenses, current assets, accounts payable, and accrued liabilities will increase spontaneously with sales. (1) The firm is operating at its full capacity, and therefore it will have to increase its fixed asset accordingly. What is the additional funding requirement for this year (after the first step of financial planning)? (2) What if the firm has to increase its fixed assets by $1,000,000 because it cannot buy a fraction of a fixed asset? What is the additional funding requirement (after the first step of financial planning)? (3) As for question (2), what should be the size of the loan if the entire funding needs are financed by a 3% bank loan (after the second step of financial planning)? A firm's most recent financial statements are as follows (in millions of dollars). Balance Sheet Assets Cash $0.5 Accounts Receivable 0.7 Inventory 0.4 Current Assets 1.6 Net Fixed Assets Total Notes Payable Current Liabilities 2.5 Long-term Debt Common Equity Total 4.1 Liabilities and Equity Accounts Payable Accrued Liabilities Income Statement Sales Cost of Goods Sold Gross Profit Operating Expenses Net Operating Income Interest Expenses Earnings before Taxes Income Taxes Net Income $ 10.0 6.6 3.4 2.1 1.3 0.3 1.0 0.4 0.6 $0.4 0.2 0.3 0.9 1.7 1.5 4.1 The management believes that sales will increase by 20 percent this year. The dividend payout ratio (Dividends / Net income) is targeted at 40 percent. The tax rate is 40%. Costs, other expenses, current assets, accounts payable, and accrued liabilities will increase spontaneously with sales. (1) The firm is operating at its full capacity, and therefore it will have to increase its fixed asset accordingly. What is the additional funding requirement for this year (after the first step of financial planning)? (2) What if the firm has to increase its fixed assets by $1,000,000 because it cannot buy a fraction of a fixed asset? What is the additional funding requirement (after the first step of financial planning)? (3) As for question (2), what should be the size of the loan if the entire funding needs are financed by a 3% bank loan (after the second step of financial planning)?

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