Finance Ch. 5 Solutions

# Percentage of sales 70000 2 3500000 forecast 24000000

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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

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(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) 5,000,000  500,000 = \$4,500,000 (d) 10,000,000  500,000 = \$9,500,000 12) (a) (250,000  125,000)  \$75,000 = \$50,000 (b) (500,000  125,000)  \$75,000 = \$300,000 (c) (1,000,000  125,000)  \$75,000 =\$800,000 (d) (1,500,000  125,000)  \$75,000 = \$1,300,000
13) (a) Net income forecast = 12%(\$800,000) = \$ 96,000 Dividend forecast = 40%(\$96,000) = 38,400 = retained earnings forecast 57,60 + BB RE 250,000 = Forecast of end-of-year retained earnings \$307,600 (b) Net income forecast = 8%(\$800,000) = \$ 64,000 Dividend forecast = 15%(\$64,000) = 9,600 = Retained earnings forecast 54,400 + BB RE 250,000 = Forecast of end-of-year retained earnings \$304,400 (c) Net income forecast = 5%(\$800,000) = \$ 40,00 Dividend forecast = 75%(\$40,000) = 30,000 = Add to retained earnings forecast 10,000 + BB RE 250,000 = Forecast of end-of-year retained earnings \$260,000 (d) Net income forecast = 8%(\$800,000) = \$ 64,000 Dividend forecast = 100%(\$64,000)= 64,000 = Add to retained earnings forecast 0 \$250,000. 14) (a)

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Percentage of sales 70000 2 3500000 Forecast 24000000 30000...

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