Forecasting - Sample Problems-Forecasting 1. Jill's Wigs...

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Sample Problems--Forecasting 1. Jill's Wigs Inc. had the following balance sheet last year: Cash Accts receivable Inventory Net fixed assets $ 800 450 950 34,000 Accounts payable Accrued wages Notes payable Mortgage Common stock Retained earnings $ 350 150 2,000 26,500 3,200 4,000 Total assets $36,200 Total liabilities and equity $36,200 Jill has just invented a non-slip wig for men which she expects will cause sales to double, increasing after-tax net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1)Will Jill need any external financing if she pays no dividends? (2) If so, how much? 2. You are given the following information: Sales $450 Costs $400 Taxes (at 34%) $ 17 Net income $ 33 Dividend payout ratio 30% If costs maintain a constant percentage of sales, what is the addition to retained earnings resulting from a 10% increase in sales? 3. You are the owner of a small business which has the following balance sheet last: Current assets Net fixed assets $ 5,000 10,000 Accounts payable Accruals Long-term debt Common equity $1,000 1,000 5,000 8,000 Total assets $15,000 Total liabilities and equity $15,000 Fixed and currents assets are fully utilized. All assets as well as accounts payables and accruals will increase at the same rate as sales. Next year you expect sales to increase by 50 percent. You also expect to retain $2,000 of next year's earnings within the firm. What is next year's additional external funding requirement, i.e., what is your firm's EFN? 4.
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This note was uploaded on 01/19/2011 for the course FINANCE fin300 taught by Professor Thomasrhee during the Fall '10 term at CSU Long Beach.

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Forecasting - Sample Problems-Forecasting 1. Jill's Wigs...

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