Each of the following events affects one or more of the tables in Sections 19.2 and 19.3.

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Each of the following events affects one or more of the tables in Sections 19.2 and 19.3. Show the effects of each event by adjusting the tables listed in parentheses. Treat each event independently.

a. Dynamic repays only $10 million of short-term debt in 2016. (Tables 19.2 and 19.3)

b. Dynamic issues an additional $40 million of long-term debt in 2016 and invests $25 million in a new warehouse. (Tables 19.2 and 19.3)

c. In 2016, Dynamic reduces the quantity of stuffing in each mattress. Customers don't notice, but operating costs fall by 10%. The firm's dividend payout ratio remains unchanged. (Tables 19.1, 19.2, and 19.3)

d. Starting in the third quarter of 2017, Dynamic employs new staff members who prove very effective in persuading customers to pay more promptly. As a result, 90% of sales are paid for immediately and 10% are paid in the following quarter. (Tables 19.4 and 19.5)

e. Starting in the first quarter of 2017, Dynamic cuts wages by $20 million a quarter. (Table 19.5)

f. In the second quarter of 2017, a disused warehouse catches fire mysteriously. Dynamic receives a $50 million check from the insurance company. (Table 19.5)

g. Dynamic's treasurer decides he can scrape by on a $10 million operating cash balance. (Table 19.5)

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A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Fundamentals of Corporate Finance

ISBN: 978-1259722615

9th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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