$120,000 equity; $60,000 long-term debt; $60,000 notes payable Income Statement
ID: 2809674 • Letter: #
Question
$120,000 equity; $60,000 long-term debt; $60,000 notes payable Income Statement Sales Costs except depreciation Depreciation EBIT Less Interest EBT Taxes (40%) Net Income Common Dividends Addition to Retained Earnings 2013 Actual $5.000.000 3.000.000 1000.000 S 500.000 300.000 S 200.000 80.000 S 120.000 100,000 20.000 2014 Forecast $7,000,000 4,200,000 2,100,000 $ 700,000 312.000 $ 388.000 155.200 232.800 100.,000 132.800 2009 Actual 2010 Forecast alance Shee Assets Cash Accounts Receivable Inventories Total Current Assets Net Plant and Equipment Tota Assets S 450.000 600,000 1.400.000 2.450.000 4.000.000 6.450.000 S 630,000 840,000 1,960,000 $1,470,000 5 600,000 $7,070,000 Liabilities and Equity Accounts Pavable Notes Pavable Accruals Total Current Liabilities Long-term bonds Total Debt Common Stock Retained Earnings Total Common Equity Total Liabilities and Equity 500,000 1,000,000 400,000 1.900.000 2 000.000 $3.900.000 2.000.000 550,000 550.000 $6.450,000 700,000 1.000,000 560.000 $2.260.000 2 000,000 $4,260,000 2,000,000 570,000 2.570,000 $6,830,000Explanation / Answer
The difference between assets and liabilities of 2010 forecasted balancesheet is 7,070,000 - 6,830,000 = $240,000. This is the additional funds required.
Carrier corp. wants to finance it with 50% equity, 25% debt and the remainder from notes payable.
Equity required = 0.5 x 240,000 = $120,000
Debt = 0.25 x 240,000 = $60,000
Notes payable = $.25 x 240,000 = $60,000
1st Option is correct.
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