Building Financial Models. The following tables contain financial
statements for Dynasta
tics Corporation. Although the company has not been growing, it now
plans to expand and will increase net fixed assets (that is, assets
net of depreciation)by $200,000 per year for the next 5 years and
forecasts that the ratio of revenues to total assets will remain at
1.50.Annual depreciation is 10 percent of net fixed assets at the
start of the year. Fixed costs are expected to remain at $56,000 and
variable costs at 80 percent of revenue. The company ?s policy is to
pay out two-thirds of net income as dividends and to maintain a book
debt ratio of 25 percent of total capital.
a. Produce a set of financial statements for 2001.Assume that net
working capital will equal 50 percent of fixed assets.
b. Now assume that the balancing item is debt, and that no equity is
to be issued. Prepare a
completed pro forma balance sheet for 2001.What is the projected debt
ratio for 2001?
INCOME STATEMENT,2000
(figures in thousands of dollars)
Revenue $1,800
Fixed costs 56
Variable costs (80%of revenue) 1,440
Depreciation 80
Interest (8%of beginning-of-year debt) 24
Taxable income 200
Taxes (at 40%)80
Net income $120
Dividends $80
Retained earnings $40
BALANCE SHEET,YEAR-END
(figures in thousands of dollars) 1999 2000
Assets
Net working capital $400 $400
Fixed assets 800 800
Total assets $1,200 $1,200
Liabilities and shareholders ?equity
Debt $300 $300
Equity 900 900
Total liabilities and
shareholders ?equity $1,200 $1,200
2 12 Economic Order Quantity. A large consulting firm orders
photocopying paper by the carton. The firm pays a $30 delivery charge
on each order. The total cost of storing the paper,
including forgone interest, storage space, and deterioration, comes to
about $1.50 per carton
per month. The firm uses about 1,000 cartons of paper per month.
a. Fill in the following table:
Order Size
100 200 250 500
Orders per month
________________________________
Total order cost
________________________________
Average inventory
________________________________
Total carrying cost s
________________________________
Total inventory costs
________________________________
b. Calculate the economic order quantity. Is your answer consistent
with your findings in
part (a)?
Trade Credit and Receivables. A firm offers terms of 2/15, net
30.Currently,two-thirds
of all customers take advantage of the trade discount; the remainder
pay bills at the due date.
a. What will be the firm ?s typical value for its accounts receivable period?
b. What is the average investment in accounts receivable if annual
sales are $20 million?
c. What would likely happen to the firm ?s accounts receivable period
if it changed its terms
to 3/15,net 30?
Cash Budget. The following data are from the budget of Ritewell
Publishers. Half the company ?s sales are transacted on a cash basis.
The other half are paid for with a 1-month delay.
The company pays all of its credit purchases with a 1-month delay.
Credit purchases in January were $30 and total sales in January were
$180.
February March April
Total sales
200 220 180
Cash purchases
70 80 60
Credit purchases
40 30 40
Labor and administrative expenses
30 30 30
Taxes, interest, and dividends
10 10 10
Capital expenditures
100 0 0
Complete the following cash budget:
February March April
Sources of cash
Collections on current sales
Collections on accounts receivable
Total sources of cash
Uses of cash
Payments of accounts payable
Cash purchases
Labor and administrative expenses
Capital expenditures
Taxes, interest, and dividends
Total uses of cash
Net cash inflow
Cash at start of period
100
+Net cash inflow
=Cash at end of period
+Minimum operating cash balance
100 100 100
=Cumulative short-term financing requireda |
Clarification of Question by
sabrinamark-ga
on
23 Jan 2005 16:55 PST
1. Building Financial Models. The following tables contain financial
statements for Dynasta
tics Corporation. Although the company has not been growing, it now
plans to expand and will increase net fixed assets (that is, assets
net of depreciation)by $200,000 per year for the next 5 years and
forecasts that the ratio of revenues to total assets will remain at
1.50.Annual depreciation is 10 percent of net fixed assets at the
start of the year. Fixed costs are expected to remain at $56,000 and
variable costs at 80 percent of revenue. The company ?s policy is to
pay out two-thirds of net income as dividends and to maintain a book
debt ratio of 25 percent of total capital.
a. Produce a set of financial statements for 2001.Assume that net
working capital will equal 50 percent of fixed assets.
b. Now assume that the balancing item is debt, and that no equity is
to be issued. Prepare a
completed pro forma balance sheet for 2001.What is the projected debt
ratio for 2001?
INCOME STATEMENT,2000
(figures in thousands of dollars)
Revenue $1,800
Fixed costs 56
Variable costs (80%of revenue) 1,440
Depreciation 80
Interest (8%of beginning-of-year debt) 24
Taxable income 200
Taxes (at 40%) 80
Net income $120
Dividends $80
Retained earnings $40
BALANCE SHEET,YEAR-END
(figures in thousands of dollars) 1999 2000
Assets
Net working capital 400 $400
Fixed assets 800 800
Total assets $1,200 $1,200
Liabilities and shareholders ?equity
Debt $300 $300
Equity 900 900
Total liabilities and shareholders ?equity $1,200 $1,200
2. Economic Order Quantity. A large consulting firm orders
photocopying paper by the carton. The firm pays a $30 delivery charge
on each order. The total cost of storing the paper,
including forgone interest, storage space, and deterioration, comes to
about $1.50 per carton per month. The firm uses about 1,000 cartons of
paper per month.
a. Fill in the following table:
Order Size
100 200 250 500
Orders per month
___________________________
Total order cost
________________________________
Average inventory
________________________________
Total carrying cost s
________________________________
Total inventory costs
________________________________
b. Calculate the economic order quantity. Is your answer consistent
with your findings in
part (a)?
3. Trade Credit and Receivables. A firm offers terms of 2/15, net
30.Currently,two-thirds
of all customers take advantage of the trade discount; the remainder
pay bills at the due date.
a. What will be the firm ?s typical value for its accounts receivable period?
b. What is the average investment in accounts receivable if annual
sales are $20 million?
c. What would likely happen to the firm ?s accounts receivable period
if it changed its terms
to 3/15,net 30?
4.Cash Budget. The following data are from the budget of Ritewell
Publishers. Half the company ?s sales are transacted on a cash basis.
The other half are paid for with a 1-month delay.
The company pays all of its credit purchases with a 1-month delay.
Credit purchases in January were $30 and total sales in January were
$180.
February March April
Total sales
200 220 180
Cash purchases
70 80 60
Credit purchases
40 30 40
Labor and administrative expenses
30 30 30
Taxes, interest, and dividends
10 10 10
Capital expenditures
100 0 0
Complete the following cash budget:
February March April
Sources of cash
Collections on current sales
Collections on accounts receivable
Total sources of cash
Uses of cash
Payments of accounts payable
Cash purchases
Labor and administrative expenses
Capital expenditures
Taxes, interest, and dividends
Total uses of cash
Net cash inflow
Cash at start of period
100
+Net cash inflow
=Cash at end of period
+Minimum operating cash balance
100 100 100
=Cumulative short-term financing requireda
|
