1. The Podrasky Corporation is considering an $80 million expansion (capital expenditure) program next year. The company wants to determine approximately how much additional financing will be needed if the expansion program is undertaken. Next year the company expects to earn $55 million after interest and taxes. The company also plans to increase its dividends from $10 million to $15 million. If the expansion program is accepted, the company expects its current assets needs to increase by approximately $25 million next year. Long-term debt retirement obligations total $2 million next year and depreciation is expected to be $20 million. No fixed assets are expected to be sold next year.
a. $28 million
b. $33 million
c. $47 million
d. $38 million
2. TTT Inc has current sales of $40 million. Sales are expected to grow to $65 million next year. TTT currently has accounts receivable of $25 million, inventories of $10 million, and the net fixed assets of $30 million. These assets are expected to grow at the same rate as sales over the next year. Accounts payable are expected to increase from their current level of $15 million to a new level of $22 million next year. TTT wants to increase its cash balance at the end of next year by $5 million. Earnings after taxes next year are forecasted to be $12 million. Next year, TTT plans to pay dividends of $1.5 million. How much external financing is required by TTT next year?
a. $28.125 million
b. $18.125 million
c. $16.375 million
d. $8.375 million
3. The stock of UCD has just been sold in an initial public offering at a price of $165 per share. One week after this offering, the stock has risen to $195. You believe the stock will rise to $245 over the coming year. You expect UCD to pay a $15 dividend during the coming year. If you require a rate of return of 30%, do you believe this is a good investment at the current price of $195?
a. Yes, the holding period return is 33.33% greater than 30%.
b. No, the holding period return is 25.64% less than 30%.
c. No, the holding period return is 23.08% less than 30%.
d. No, the holding period return is 15.38% less than 30%.
4. Which of the following is true?
a. If you
1. The Podrasky Corporation is considering an $80 million expansion (capital expenditure) program next year. The company wants to determine approximately how much additional financing will be needed if the expansion program is undertaken. Next year the company expects to earn $55 million after interest and taxes. The company also plans to increase its dividends from $10 million to $15 million. If the expansion program is accepted, the company expects its current assets needs to increase by approximately $25 million next year. Long-term debt retirement obligations total $2 million next year and depreciation is expected to be $20 million. No fixed assets are expected to be sold next year.
a. $28 million
b. $33 million
c. $47 million
d. $38 million
| 2. TTT Inc has current sales of $40 million. Sales are expected to grow to $65 million next year. TTT currently has accounts receivable of $25 million, inventories of $10 million, and the net fixed assets of $30 million. These assets are expected to grow at the same rate as sales over the next year. Accounts payable are expected to increase from their current level of $15 million to a new level of $22 million next year. TTT wants to increase its cash balance at the end of next year by $5 million. Earnings after taxes next year are forecasted to be $12 million. Next year, TTT plans to pay dividends of $1.5 million. How much external financing is required by TTT next year? |
a. $28.125 million
b. $18.125 million
c. $16.375 million
d. $8.375 million
| 3. The stock of UCD has just been sold in an initial public offering at a price of $165 per share. One week after this offering, the stock has risen to $195. You believe the stock will rise to $245 over the coming year. You expect UCD to pay a $15 dividend during the coming year. If you require a rate of return of 30%, do you believe this is a good investment at the current price of $195? |
a. Yes, the holding period return is 33.33% greater than 30%.
b. No, the holding period return is 25.64% less than 30%.
c. No, the holding period return is 23.08% less than 30%.
d. No, the holding period return is 15.38% less than 30%.
| 4. Which of the following is true? |
a. If you
Related questions
ST3. Use the percentage of sales forecasting method to compute the additional financ- ing needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to increase from a current level of $20 million to a new level of $25 million over the coming year. LSS expects earnings after taxes to equal $1 million over the next year (2014). LSS intends to pay a $300,000 dividend next year. The current year balance sheet for LSS is as follows:
Lambrechts Specialty Shops, Inc. Balance Sheet as of December 31, 2013
| cash 1,000,000 | Accounts Payable 3,000,000 |
| accounts receivable 1,500,000 | Notes payable 3,000,000 |
| inventories 6,000,000 | Long term debt 2,000,000 |
| net fixed assets 3,000,000 | Stockholders' equity 3,500,000 |
| Total assets 11,500,000 | Total liabilities and equity 11,500,000 |
All assets, except âcash,â are expected to vary proportionately with sales. Of total liabilities and equity, only âaccounts payableâ is expected to vary proportionately with sales.
