A firm has just completed their review of proposed projects for the coming year and has determined that they would like to invest a total of $219,000 in new projects. The firm follows a residual dividend policy and has a target debt-equity ratio 0.2. The firm wants to pay dividends totaling $39,500 this year. To do so, how much must the firm earn in after-tax income this year?

	a.	$222,000
	b.	$156,000
	c.	$176,375
	d.	$161,875

LTI, Inc. has projected their first quarter sales at $7,500, second quarter sales at $8,000, and third quarter sales at $8,400. The firm's cost of goods sold is equal to 55 percent of the next quarter's sales. The accounts receivable period is 30 days and the accounts payable period is 45 days. At the beginning of the first quarter, the firm has an accounts receivable balance of $3,600 and an accounts payable balance of $2,750. The firm pays $1,000 a month in cash expenses and $200 a month in taxes. At the beginning of the first quarter, the cash balance is $320 and the short-term loan balance is zero. During the first quarter, the firm is planning on spending $2,500 for some new equipment. The firm maintains a minimum cash balance of $500. Assume that each month has 30 days. The net cash flow for the first quarter is _____ and the cumulative cash surplus (deficit) at the end of the first quarter, prior to any short-term borrowing, is _____.

	a.	$368; $188
	b.	$950; $770
	c.	-$567; -$297
	d.	-$767; -$947

Answer rating: 100% (QA)

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