SEATWORK3 FINANCIAL PLANNING

SEATWORK3 FINANCIAL PLANNING - 11.63%10.71% Dividends 60 44...

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SEATWORK # 3 4-5A. Cash $ .1m Current Liabilities $.6m Accounts Receivable .1m Long-Term Debt .4m Inventories 1.0m Common Stock plus Net Fixed Assets .8m Retained earnings 1.0m $2.0m $2.0m 4-8A. (a) Current assets 1 $16m Accounts payable 2 $ 8m Net fixed assets 15 m Notes payable 3 3m $31m Bonds payable 10m Common equity 10 m $31m ____________ 1 x $80m = $16m 2 x $80m = $ 8m 3 $31m - $28m = $ 3m (Balancing figures which equal estimated discretionary financing needs in 2004) ____________ (b) = - - bonds - = $31m - $8m - $10m - $10m = $3m 4-12A. a. Calculations of the sustainable rate of growth for ADP, Inc. for each of the years 1999 through 2003 : 2003 2002 2001 2000 1999 Net Income 150 110 90 70 60 Common Equity 812 722 656 602 560 ROE 18.47% 15.24% 13.72%
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Unformatted text preview: 11.63%10.71% Dividends 60 44 36 28 24 b 40% 40% 40% 40% 40% g* 11.1% 9.1% 8.2% 7.0% 6.4% b. Compare actual sales growth rates to the sustainable rate if growth for each year. 2003 2002 2001 2000 1999 Sales 3,000 2,200 1,800 1,400 1,200 Sales growth rate 36.4% 22.2% 28.6% 16.7% N/A g* 11.1% 9.1% 8.2% 7.0% 6.4% Difference 25.3% 13.1% 20.4% 9.7% N/A A quick review of ADP's balance sheets over the test years reveals a growing reliance on debt financing. The firm's debt ratio in 1999 was roughly 48% while it had grown to 70% in 2003. Thus, ADP has financed its growth with increased debt financing....
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SEATWORK3 FINANCIAL PLANNING - 11.63%10.71% Dividends 60 44...

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