Refer to the Judd Enterprises financial statements. What is Judd's projected retained earnings under this plan? These
Question:
Refer to the Judd Enterprises financial statements. What is Judd's projected retained earnings under this plan? | ||||||
These are the simplified financial statements for Judd Enterprises. | ||||||
Income statement | Current | Projected | ||||
Sales | na | 1,000 | ||||
Costs | na | 720 | ||||
Profit before tax | na | 280 | ||||
Taxes (25%) | na | 70 | ||||
Net income | na | 210 | ||||
Dividends | na | 63 | ||||
Balance sheets | Current | Projected | Current | Projected | ||
Current assets | 100 | 115 | Current liabilities | 70 | 81 | |
Net fixed assets | 900 | 1,080 | Long-term debt | 400 | ||
Common stock | 300 | |||||
Retained earnings | 230 |
In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
Last year's sales = S0 | $200,000 | Last year's accounts payable | $50,000 |
Sales growth rate = g | 40% | Last year's notes payable | $15,000 |
Last year's total assets = A0* | $137,500 | Last year's accruals | $20,000 |
Last year's profit margin = PM | 20.0% | Target payout ratio | 25.0% |
You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), which is planning its operation for the coming year. The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 90%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions.
Last year's sales = S0 | $300.0 | Last year's accounts payable | $50.0 |
Sales growth rate = g | 40% | Last year's notes payable | $15.0 |
Last year's total assets = A0* | $500 | Last year's accruals | $20.0 |
Last year's profit margin = PM | 20.0% | Initial payout ratio | 10.0% |
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella