Upton Computers makes high-volume purchases of small computers, stores them in well-located warehouses, and ships them to
Question:
Upton Computers makes high-volume purchases of small computers, stores them in well-located warehouses, and ships them to its chain of distributors. Your balance sheet for December 31, 2005 (in millions of dollars) is attached here.
Cash | $ 3.5 | Accounts payable | $ 9.0 |
Receivable | 26.0 | Notes payable | 18.0 |
Inventories | 58.0 | Accruals | 8.5 |
Total current assets | $87.5 | Total current liabilities | $ 35.5 |
Net fixed assets | 35.0 | Mortgage loan | 6.0 |
Common stock | 15.0 | ||
Retained earnings | 66.0 | ||
Total assets | $122.5 | Total liabilities and equity | $122.5 |
In 2005, sales amounted to $ 350 million, while net income was $ 10.5 million. The company paid dividends of $ 4.2 million to common stockholders. It is working at full capacity. Assume that all ratios remain constant. to.
a. If according to the estimates, sales will increase by $ 70 million (20%) during 2006, with the FAN equation determine the projected external needs for external capital.
b. Construct the pro forma balance sheet for December 31, 2006. Suppose external capital needs are met by bank loans and that are reflected in the documents payable. Assume that the profit margin and dividend yield ratio are held constant.
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham