Green Caterpillar Garden Supplies Inc. has the following end-of-year balance sheet: Green Caterpillar Garden Supplies Inc....

Transcribed Image Text:

Green Caterpillar Garden Supplies Inc. has the following end-of-year balance sheet: Green Caterpillar Garden Supplies Inc. Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents Accounts payable Accounts receivable Accrued liabilities Inventories Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) Total Assets $150,000 400,000 350,000 $900,000 $2,100,000 $3,000,000 Notes payable Total Current Liabilities Long-Term Bonds Total Debt Common Equity Common stock Retained earnings Common Equity Total Liabilities and Equity $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 800,000 700,000 $1,500,0 $3,000,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Green Caterpillar Garden Supplies Inc. generated $450,000 net income on sales of $13,000,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 35%. Suppose Green Catepillar's assets are fully utilized. Using the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support a firm's expected sales, it is projected that Green Catepillar will require in additional assets. When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Green Catepillar this year? $72,000 $68,400 $86,400 $75,600 In addition, Green Caterpillar Garden Supplies Inc. is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. Given the preceding information, Green Catepillar expects to generate $ earnings. (Hint: Round your answer to the nearest whole dollar.) from operations that will be added to its existing retained According to the AFN equation and projections for Green Caterpillar Garden Supplies Inc., the firm's AFN is $ Green Caterpillar Garden Supplies Inc. has the following end-of-year balance sheet: Green Caterpillar Garden Supplies Inc. Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents Accounts payable Accounts receivable Accrued liabilities Inventories Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) Total Assets $150,000 400,000 350,000 $900,000 $2,100,000 $3,000,000 Notes payable Total Current Liabilities Long-Term Bonds Total Debt Common Equity Common stock Retained earnings Common Equity Total Liabilities and Equity $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 800,000 700,000 $1,500,0 $3,000,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Green Caterpillar Garden Supplies Inc. generated $450,000 net income on sales of $13,000,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 35%. Suppose Green Catepillar's assets are fully utilized. Using the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support a firm's expected sales, it is projected that Green Catepillar will require in additional assets. When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Green Catepillar this year? $72,000 $68,400 $86,400 $75,600 In addition, Green Caterpillar Garden Supplies Inc. is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. Given the preceding information, Green Catepillar expects to generate $ earnings. (Hint: Round your answer to the nearest whole dollar.) from operations that will be added to its existing retained According to the AFN equation and projections for Green Caterpillar Garden Supplies Inc., the firm's AFN is $

Answer rating: 100% (QA)

To answer the first question we need to calculate the amount of spontaneous liabilities that will be generated by Green Caterpillar Garden Supplies In... View the full answer