Angel plc is a listed firm is in the apparel business with the Gabriel brand. It...
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Angel plc is a listed firm is in the apparel business with the Gabriel brand. It sold 20 million units for £20 per unit in its financial year ending at 30th June 2020. In 2020- 2021, it is introducing their new brand, Magdalene, which is a cheaper brand. This new brand can increase revenue by 40%. Angel expects capital expenditures of £40 million in 2020-2021 to be used for replacement and sales expansion purposes. Angel's summarised balance sheet (Statement of Financial Position) for the year ending 30 June 2020 is as the following: Assets Utilised Fixed (non-current) Current: Inventory Accounts Receivable Cash Current Liabilities: Corporate Tax payable Accounts Payable Net current assets 12% Debts (More than 1 year) Net assets Equity : Ordinary equity (50pence nominal value) Reserves Investors' funds £ million 32 46 12 (10) (36) £ million 90 (46) £ million 240 44 (40) 244 120 124 244 The company's profit before tax and interest at 30th June, 2020 was 32% of sales, after reducing depreciation of £10 million. The changes in depreciation for 2020-21 is deemed to increase to eighteen million pounds. Corporate tax is 33%, with 1-year delay payment. The firm plan to increase dividends by 5% per annum. For the financial year ending 30 June, 2020, its payout amounts to £10 million net. The firm's cash balances cannot be reduced to below 6% of sales. Required (a) As an advisor, evaluate the external financing of the firm to raise capital to support their sales expansion. Note: All depreciation provisions are eligible for tax relief. (13 marks) (b) Evaluate SIX (6) appropriate methods of financing to support Angel's sales expansion. (12 marks) [Total: 25 Marks] Angel plc is a listed firm is in the apparel business with the Gabriel brand. It sold 20 million units for £20 per unit in its financial year ending at 30th June 2020. In 2020- 2021, it is introducing their new brand, Magdalene, which is a cheaper brand. This new brand can increase revenue by 40%. Angel expects capital expenditures of £40 million in 2020-2021 to be used for replacement and sales expansion purposes. Angel's summarised balance sheet (Statement of Financial Position) for the year ending 30 June 2020 is as the following: Assets Utilised Fixed (non-current) Current: Inventory Accounts Receivable Cash Current Liabilities: Corporate Tax payable Accounts Payable Net current assets 12% Debts (More than 1 year) Net assets Equity : Ordinary equity (50pence nominal value) Reserves Investors' funds £ million 32 46 12 (10) (36) £ million 90 (46) £ million 240 44 (40) 244 120 124 244 The company's profit before tax and interest at 30th June, 2020 was 32% of sales, after reducing depreciation of £10 million. The changes in depreciation for 2020-21 is deemed to increase to eighteen million pounds. Corporate tax is 33%, with 1-year delay payment. The firm plan to increase dividends by 5% per annum. For the financial year ending 30 June, 2020, its payout amounts to £10 million net. The firm's cash balances cannot be reduced to below 6% of sales. Required (a) As an advisor, evaluate the external financing of the firm to raise capital to support their sales expansion. Note: All depreciation provisions are eligible for tax relief. (13 marks) (b) Evaluate SIX (6) appropriate methods of financing to support Angel's sales expansion. (12 marks) [Total: 25 Marks]
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SOLUTION Projected sales for year 2021 Sales for the year ending 30062... View the full answer
Related Book For
College Algebra Graphs and Models
ISBN: 978-0321845405
5th edition
Authors: Marvin L. Bittinger, Judith A. Beecher, David J. Ellenbogen, Judith A. Penna
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