Corporate Financial Models and Long-term Planning

Corporate Financial Models and Long-term Planning - Chapter...

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Answers to End-of-Chapter Problems B-215 Chapter 26: Corporate Financial Models and Long-term Planning 26.1 Forecast sales: S = 0.00001 GNP = 0.00001 ($2,050 billion) = $20,500,000 Compute the other values: CA = $500,000 + 0.25 ($20,500,000) = $5,625,000 FA = $1,000,000 + 0.50 ($20,500,000) = $11,250,000 CL = $100,000 + 0.10 ($20,500,000) = $2,150,000 NP = 0.02 ($20,500,000) = $410,000 Compute the new amount of retained earnings: RE = NP (1 - 0.34) = $410,000 (0.66) = $270,600 RE = $3,400,000 + $270,600 = $3,670,600 Compute the new amount of bonds: Debt-to-Asset Ratio = ($1,100,000 + $2,500,000) / ($3,000,000 + $6,000,000) = 0.40 Bonds = [(CA + FA) x 0.40] - CL = ($5,625,000 + $11,250,000) (0.40) - $2,150,000 = $4,600,000 Compute the new amount of stock: Stock = [(CA + FA) - (CL + Bonds + RE)] = ($5,625,000 + $11,250,000) - ($2,150,000 + 4,600,000 + 3,670,600) = $6,454,400 Balance Sheet Current Assets 5,625,000 Current Liabilities $2,150,000 Fixed Assets 11,250,000 Bonds 4,600,000 Total Assets $16,875,000 Common Stock 6,454,400 Retained Earnings 3,670,600 Total Liabs & CS $16,875,000 26.2 S = 330 - 330 / (1 + 10%) = $30 million a. External funds needed = (25% +150%) x 30 - (40% + 45%) x 30 - (12% x 330) (1 - 40%) = $3.24 million b. Current assets = 25% x 330 / (1 + 10%) = 75 Fixed assets = 150% x 330 / (1+10%) = 450 Total assets = Current assets + Fixed assets = 75 + 450 = $525 million Short term debt = 40% x 330 / (1+10%) = 120 Long term debt = 45% x 330 / (1 + 10%) = 135 Common stock = 50 Retained earnings = 220 Total liabilities = $525 million
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Answers to End-of-Chapter Problems B-216 c. Pro Forma Balance Sheet Current assets = 25% x 330 = 82.5 Fixed assets = 150% x 330 = 495 Total assets = $577.5 million Short term debt = 40% x 330 = 132 Long term debt = 45% x 330 = 148.5 Common stock = 50 Retained earnings = 243.76 Total liabilities = 574.26 External fund needed = 577.5-574.26 = $3.24 million
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This note was uploaded on 10/07/2009 for the course CF CF taught by Professor Cf during the Spring '09 term at American Academy of Art.

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Corporate Financial Models and Long-term Planning - Chapter...

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