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Htlps:/ng.cengage.com/static/nb/ui/evo/index.htmi?elSBN-97813373951208id 341556132&snapshotld 8815858 f: Apps Bookmarks D Course Materials M McGraw-Hill Cconnect M McGraw-Hill ConnectHomework how to create pivot 5% MINDTAP Ch 09: End-of-Chapter Problems-Corporate Valuation and Financial Planning Q Search this course Assignment: Ch 09: End-of-Chapter Problems-Corporate Valuation and Financial Planning Assipment Score 2500 3. Check My Work (a remaining) 5, Problem Walk-Through Long-Term Financing Needed At year-end 2018, wallace Landscaping's total assets were S2.30 million, and its increase by 20% in 2019. Total assets and accounts payable are proportional to sales, and that relationship will be maintained, Wallace typically uses no current Nabi ties other than accounts payable. Common stock amounted to $450,000 in 2018, and retained earnings were $370,000. Wallace has arranged to sell $1,30,000 of new common 7. eants Payable Ree geda sates, when eige re tit Pikeerureen 8 The remainder of its financing needs will be met by issuing new long-term debt at the end of 2019.(Because the detis m debt at the end of 2019. (Because the debt is debt) lts net profit margin on sales is 8. and 40% of earnings well be paid out as added at the end of the year, there will be no additional interest expense due to the new dividends. a. What was Wallace's total long-term debt in 20187 Do not round intermediate calculations. Round $11400c What were Wallace's total liabilities in 2018? Do not round intermediate calculations. Round your answer to the nearest dolar $14800c b. How much new long-term debt financing will be needed in 20197 (Hint: AFN - New stock -New long-term debt.) Do not round intermediate caiculations. Round your answer to the nearest dollar Check My Work (a remaining)Explanation / Answer
a) (i)Wallace long term debt in 2018
Total assets - Accounts Payable - Common stock - Retained Earnings
= 2,300,000 - 340,000 - 450,000 - 370,000
= $ 1,140,000
(ii) Total liabilities in 2018
Long term debt + Accounts Payable
= 1,140,000 + 340,000
= $ 1,480,000
b)
Net profit/Retained earning for the year 2019
Sales * Net profit margin on sales - dividends
= (3.1*1.20 (20% increase) * 8% - 40% dividends
= 297,600 - (297,600*40%)
= $178,560
Now, the Assets and accounts payable will be,
Assets = 2.30 million * 1.20 = 2.76 million
Accounts Payable = 0.34 * 1.20 = 0.408 million
so, long term debt liability
= Total assets - Common stock - Accounts payable - Retained Earnings
= 2,760,000 - 450,000 - 130,000 - 408,000 - 178,560
= $ 1,593,440
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