Suppose a firm generated $20 million in sales revenue while operating at 86% of
ID: 2783899 • Letter: S
Question
Suppose a firm generated $20 million in sales revenue while operating at 86% of existing capacity. What would be the maximum level of sales that could be achieved with the existing asset base?
A company paid dividends of $15,000, generated total sales of $845,000, and incurred total expenses of $792,000 in the current year. If ending retained earnings is $165,000, what was beginning retained earnings?
In the current year, a company paid interest of $50,000, had net capital expenditures of $300,000, and issued net new debt of $90,000. In addition, the company reported cash flow from operating activities of $500,000, cash flow from investing activities of ($350,000), and cash flow from financing activities of $165,000. The marginal tax rate is 30%. Compute the free cash flow to the equity holders.
A company has the following information for the current year:
Current assets
$42,500
Current liabilities
$24,650
Noncurrent assets
224,000
Noncurrent liabilities
173,200
Total assets
$266,500
Retained earnings
19,475
All other equity
49,175
Total liabilities and equity
$266,500
Sales revenue is forecasted to grow by 13% next year, forecasted net income is expected to be $30,000, and all current assets and current liabilities vary proportionally with sales. If $45,000 worth of net noncurrent assets are required to be purchased next year, what is the external financing needed? Assume that the company does not pay dividends, and that all noncurrent liabilities and equity (except retained earnings) will be the same level as the current year.
Current assets
$42,500
Current liabilities
$24,650
Noncurrent assets
224,000
Noncurrent liabilities
173,200
Total assets
$266,500
Retained earnings
19,475
All other equity
49,175
Total liabilities and equity
$266,500
Explanation / Answer
1) Max Sales = 20 / 86% = 23.26 million
2) Retained earnings this year = Profits - Dividends = 845,000 - 792,000 - 15,000 = 38,000
Beginning retained earnings = Ending RE - this year RE = 165,000 - 38,000 = 127,000
3) FCFE = OCF - Capex + net borrowing
= 500,000 -300,000 + 90,000
= 290,000
4) EFN = Assets - Current Liabilites - Earnings Retained
= (42,500 x 13% + 45,000) - 24,650 x 13% - 30,000
= 17,320.5
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