{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

MGMT310_lecture4_5_problems

MGMT310_lecture4_5_problems - should it issue 2 If the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Another pro forma example… Recent (Actual) Financial Statements: Income statement Balance sheet Sales $2,000 CA $250 CL $100 CoGS/other exp. 860 FA 550 LTD 200 Depreciation 55 Equity 500 EBIT 1 085 Total $800 Total $800 1,085 Interest 20 Taxable Income 1,065.00 Taxes (35%) 372.75 Net Income $ 692 25 Note: For simplicity, let’s assume interest free debt $ 692.25 Sales are projected to rise by 10%. Let’s assume non depreciation costs, current assets, and fixed assets grow at the same rate as sales, the depreciation expense is always 10% of fixed assets interest expense is 10% of the amount of long term debt always 10% of fixed assets, interest expense is 10% of the amount of long term debt, and that the dividend payout ratio is 90%. 1. If the firm’s only possible source of external financing is through equity, how much
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: should it issue? 2. If the firm’s only possible source of external financing is through long ‐ term debt, how much LTD should it issue? In each case above, what would be CF from assets? CF to shareholders? To creditors? ractice problems Practice problems • hapter 4: Chapter 4: – 16, 17, 18 , 25 r # 8 addition to info provided in problem – For # 18 , in addition to info provided in problem, assume Percentage of Sales Approach, and also ssume at you cannot issue equity assume that you cannot issue equity hapter 5 • Chapter 5 – 8, 9, 17, 18...
View Full Document

{[ snackBarMessage ]}