a 6. Calculating EFN with multiple conditions: In Problem 4, suppose the firm was operating at only 80 percent capacity in 2011. Also, going into 2012 it expects the following changes to take place: (1) the firm will want to have a minimum cash balance of $30,000 (higher minimum cash balance); (2) its customers will start making payments by day 30, in other words DSO will become 30 or Account Receivable outstanding will be 30 days of sales; (3) they will start paying suppliers every 10 days on average, in other words DPO will become 10; (4) Inventory Turnover will slow down to 6 times a year, in other words DIO will become 61 days and the firm will take longer to turn its inventory over. What is EFN now? *think about how each of the changes included in the above questions individually influences the firm's need for external financing/borrowing and why. 8. Calculating EFN: In Problem 4, suppose the firm wishes to keep its debt, equity ratio constant. What is EFN now? 9. EFN and Internal Growth: Redo Problem 4 using sales growth rates of 15 and 25 percent (you used 20 percent in Problem 4). Illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the relationship between them. At what growth rate is the EFN equal to zero? (Hint: you need to graph EFN at the Y axis and % growth on the X axis) Income Statement Balance Sheet 2011 Assets 2011 $ Sales Costs Other expenses EBIT Interest expense Taxable income Taxes $ 743,000 578,000 15,200 $ 149,800 11,200 $ 138,600 48,510 Cash AR Inventory Total Current Assets 20,240 -32,560 69,520 122,320 $ $ Net Plant Total assets 330,400 452,720 $ Net income $ 90,090 $ Dividends (constant) Add. to RE 27,027 63,063 $ $ 54,400 13,600 68,000 126,000 194,000 Liabilities and owners' equity AP NP Total Current Liabilities Long-term Debt Total Liabilities Owners' Equity Common Stock RE Total Owner's Equity Total Liabilities and Owners' Equity $ $ $ 112,000 146,720 258,720 452,720 $ S a 6. Calculating EFN with multiple conditions: In Problem 4, suppose the firm was operating at only 80 percent capacity in 2011. Also, going into 2012 it expects the following changes to take place: (1) the firm will want to have a minimum cash balance of $30,000 (higher minimum cash balance); (2) its customers will start making payments by day 30, in other words DSO will become 30 or Account Receivable outstanding will be 30 days of sales; (3) they will start paying suppliers every 10 days on average, in other words DPO will become 10; (4) Inventory Turnover will slow down to 6 times a year, in other words DIO will become 61 days and the firm will take longer to turn its inventory over. What is EFN now? *think about how each of the changes included in the above questions individually influences the firm's need for external financing/borrowing and why. 8. Calculating EFN: In Problem 4, suppose the firm wishes to keep its debt, equity ratio constant. What is EFN now? 9. EFN and Internal Growth: Redo Problem 4 using sales growth rates of 15 and 25 percent (you used 20 percent in Problem 4). Illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the relationship between them. At what growth rate is the EFN equal to zero? (Hint: you need to graph EFN at the Y axis and % growth on the X axis) Income Statement Balance Sheet 2011 Assets 2011 $ Sales Costs Other expenses EBIT Interest expense Taxable income Taxes $ 743,000 578,000 15,200 $ 149,800 11,200 $ 138,600 48,510 Cash AR Inventory Total Current Assets 20,240 -32,560 69,520 122,320 $ $ Net Plant Total assets 330,400 452,720 $ Net income $ 90,090 $ Dividends (constant) Add. to RE 27,027 63,063 $ $ 54,400 13,600 68,000 126,000 194,000 Liabilities and owners' equity AP NP Total Current Liabilities Long-term Debt Total Liabilities Owners' Equity Common Stock RE Total Owner's Equity Total Liabilities and Owners' Equity $ $ $ 112,000 146,720 258,720 452,720 $ S