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# CHAPTER 4 SUPPLEMENTAL PROBLEMS 4- 2. Brindley Pharmaceuticals, Inc. projects next year's sales will be \$20 million. Current sales are \$15 million...

I have attached the formula we are suppose to use. I cannot figure out 4-2B

CHAPTER 4 SUPPLEMENTAL PROBLEMS 4- 2. Brindley Pharmaceuticals, Inc. projects next year’s sales will be \$20 million. Current sales are \$15 million based on current assets of \$5 million and fixed assets of \$5 million. The firm’s net profit margin is 5% after taxes. Brindley Pharmaceuticals forecasts that current assets will rise in direct proportion to the increase in sales, but fixed assets will increase by only \$100,000. Currently, Brindley Pharmaceuticals has \$1.5 million in accounts payable which vary directly with sales; \$2 million in long-term debt due in 10 years; and common equity (including \$4 million in retained earnings) totaling \$6.5 million. Brindley Pharmaceuticals plans to pay \$500,000 in common stock cash dividends next year. 4-2a. Given the firm’s projections and dividend payments plan, what is its external financing needs? 4-2b. Based on your projections and assuming the \$100,000 expansion in fixed assets will take place and \$500,000 in cash dividends will be paid, what is the largest increase in sales the firm can support without having to resort to the use of external sources of financing? = + x NI D A SL t t t 1 t 1 x x S 1 - t S S S NI t t t 1 t 1           Answers: 4-1a. Projected Financing Needs = \$11,250,000 4-1b. EFN = \$(500,000) 4-2a. EFN = \$766,650 4-2b. The largest increase in sales that can occur without a need to raise external funds = \$818,200

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