Lindsey Insurance Co. has current sales of $10 million and predicts next years sales will grow to
Question:
Lindsey Insurance Co. has current sales of $10 million and predicts next year’s sales will grow to $14 million. Current assets are $3 million and fixed assets are $4 million. The firm’s net profit margin is 7 percent after taxes. Presently, Lindsey has $900,000 in accounts payable, $1.1 million in long-term debt, and $5 million (including $2.5 million in retained earnings) in common equity. Next year, Lindsey projects that current assets will rise in direct proportion to the forecasted sales, and that fixed assets will rise by $500,000. Lindsey also plans to pay dividends of $400,000 to common shareholders.
a). What are Lindsey's total financing needs for the upcoming year?
b). Given the information above, what are Lindsey's discretionary financing needs?
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates