Finance Ch. 5 Solutions

# Finance Ch. 5 Solutions - Janine Nipal Ch 5 Problems...

This preview shows pages 1–6. Sign up to view the full content.

Janine Nipal Ch. 5 Problems 1) (a) (b) (c) (d) Sales \$8,000,000 \$8,800,000 \$9,500,000 \$10,000,000 CGS 4,800,000 5,280,000 5,700,000 6,000,000 Op. Exp. 2,510,000 2,686,000 2,840,000 2,950,000 EBIT 690,000 834,000 960,000 1,050,000 Interest 250,000 250,000 250,000 250,000 EBT 440,000 584,000 710,000 800,000 Taxes 154,000 204,400 248,500 280,000 EAT \$ 286,000 \$ 379,600 \$ 461,500 \$ 520,000 CGS: \$4,800,000 = .6 \$8,000,000 Operating expense: \$1,760,000 = .22 \$8,000,000 2) First convert the variable items to "percentage-of-sales" Cost of goods sold: \$1,200,000 = 40% \$3,000,000 Operating expense: \$960,000 = 32% \$3,000,000 (a) (b) (c) (d) Sales \$3,400,000 \$3,900,000 \$4,200,000 \$4,500,000 Cost of Goods 1,360,000 1,560,000 1,680,000 1,800,000 Operating Exp 1,088,000 1,448,000 1,544,000 1,640,000 EBIT 752,000 892,000 976,000 1,060,000 Interest 120,000 120,000 120,000 120,000 EBT 632,000 772,000 856,000 940,000 Taxes 221,200 270,200 299,600 329,000 EAT \$ 410,800 \$ 501,800 \$ 556,400 \$ 611,000 Notes:Cost of Goods = 40% of sales Operating Expense = 32% of sales + \$200,000 Interest = .12(1,000,000) = \$120,000 Taxes = .35 of EBT 3) Accounts receivable: 450,000 = 10% 4,500,000 Inventory: 200,000 = 4.44% 4,500,000 Accounts payable: 300,000 = 6.67% 4,500,000

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

View Full Document
(a) Sales forecast = \$4,000,000 Accounts receivable = 10%(\$4,000,000) = \$400,000 Inventory = 4.44%(\$4,000,000) = \$177,600 Accounts payable = 6.67%(\$4,000,000) = \$266,800 (b) Sales forecast = \$4,500,000 Accounts receivable = 10%(\$4,500,000) = \$450,000 Inventory = 4.44%(\$4,500,000) = \$199,800 Accounts payable = 6.67%(\$4,500,000) = \$300,150 (c) Sales forecast = \$5,000,000 Accounts receivable = 10%(\$5,000,000) = \$500,000 Inventory = 4.44%(\$5,000,000) = \$222,000 Accounts payable = 6.67%(\$5,000,000) = \$333,500 (d) Sales forecast = \$6,000,000 Accounts receivable = 10%(\$6,000,000) = \$600,000 Inventory = 4.44%(\$6,000,000) = \$266,400 Accounts payable = 6.67%(\$6,000,000) = \$400,200 4) \$75,000 = 5% \$1,500,000 Accrued payables = 5% s (a) \$65,000 = 5% of sales Sales = \$65,000 = \$1,300,000 .05 (b) \$75,000 = 5% of sales Sales = \$75,000 = \$1,500,000 .05 (c) \$90,000 = 5% of sales Sales = \$90,000 = \$1,800,000 .05 (d) \$120,000 = 5% of sales Sales = \$120,000 = \$2,400,000 .05 5) (a) AR = 12.5% of sales = 12.5%(200,000) = \$25,000 (b) AR = 12.5%(400,000) = \$50,000 (c) AR = 12.5%(800,000) = \$100,000 (d) AR = 12.5%(1,600,000) = \$200,000 6) (a) AR = 8.33% of s 100,000 = 8.33% of s
Sales = \$100,000 = \$1,200,000 .0833 (b) \$250,000 = 8.33% of s Sales = 250,000 = \$3,000,000 .0833

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

View Full Document
(c) \$500,000= 8.33% of s Sales = 500,000 = \$6,000,000 .0833(d) \$1,000,000 = 8.33% of sales Sales = \$1,000,000 = \$12,000,000 .0833 7) 140,000 = 4% 3,500,000 = \$160,000 under all four alternatives Marketable securities (a) Treat all marketable securities as spontaneous: Percentage of sales: \$100,000 = 2.86% \$3,500,000 Forecast: 2.86%(\$4,000,000) = \$114,400 (b) Treat 70%(\$100,000) = \$70,000 as spontaneous 30%(\$100,000) = \$30,000 as discretionary Percentage of sales: \$70,000 = 2% \$3,500,000 Forecast: 2%(\$4,000,000) + \$30,000 = \$80,000 + 30,000 = \$110,000 (c) 30%(\$100,000) = \$30,000 - spontaneous 70%(\$100,000) = \$70,000 - discretionary Percentage of sales: \$30,000 = 0.86% \$3,500,000 Forecast:0.86%(4,000,000) + \$70,000=34,400 + 70,000=\$104,400 (d) If the entire marketable securities balance is discretionary, we predict that it won’t change (unless management makes a change). Forecast = \$100,000 8) \$250,000 = 2.50% \$10,000,000 2.50%(\$12,000,000) = \$300,000 under all four alternatives (a) Percentage of sales: 175,000 = 1.75% `0,000,000 Forecast: 1.75%(12,000,000) = \$210,000 (b) Percentage of sales: 105,000 = 1.05% 10,000,000 Forecast: 1.05%(12,000,000) + \$70,000 = \$126,000 + 70,000 = \$196,000
(c) Percentage of sales: 43,750 = 0.44% 10,000,000 Forecast: 0.44%(12,000,000) + 131,250 = 52,800 + 131,250 = \$184,050 (d) If the entire marketable securities balance is discretionary, we predict that it won’t change (unless management makes a change). Forecast = \$175,000 9) (a) Percentage of sales = 5,000,000 = 31.25% 16,000,000 Forecast: 31.25%(\$20,000,000) = \$6,250,000 (b) Forecast: \$5,000,000 + 1,500,000 = \$6,500,000 (c) Plant used = 90% x \$5,000,000 = \$4,500,000 true percentage: 4,500,000 = .28125 = 28.125% 16,000,000 Forecast: 28.125% x 20,000,000 = \$5,625,000 (d) Forecast = \$5,000,000 + 750,000 = \$5,750,000 10) (a) Percentage of sales = 12,000,000 = 40% 30,000,000 Forecast: 40%(40,000,000) = \$16,000,000 (b) Forecast: \$12,000,000 + 5,000,000 = \$17,000,000 (c) Plant used = 90% x 12,000,000 = \$10,800,000 true percentage: 10,800,000 = 36% 30,000,000 Forecast: 36% x \$40,000,000 = \$14,400,000 (d)Plant used = 70% x \$12,000,000 = \$8,400,000 true percentage: \$8,400,000 = .28 = 28% \$30,000,000 sales: 28% x \$40,000,000 = \$11,200,000 Forecast: \$12,000,000 11) (a) 500,000  500,000= \$0 (b) 2,500,000  500,000= \$2,000,000 (c)

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern