Corporate Finance help
Need this by Saturday November 26, 2016. Please find all the information needed attached below.
Answer the following questions
1.Calculate all of the ratios listed in the industry table for East Coast Yachts.
2. Compare the performance of East Coast Yachts to the industry as a whole. For each ratio comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you interpret this ratio? How does East Coast Yachts compare to the industry average?
3. Calculate the sustainable growth rate of East Coast Yachts. Calculate external funds needed and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question.
4. As a practical matter, East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the owners don’t want to dilute their existing ownership and control positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of East Coast Yachts expansion plans? (Only 1 recommendations are needed.)
5. Most assets can be increased as a percentage of sales. For instance, cash, can be increased by any amount. However fixed assets often must be increased in specific amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case a company has a staircase or lumpy fixed cost structure. Assume that East Coast Yachts is currently producing at 100 percent of capacity. As a result, to expand production, the must set up an entirely new line at a cost of $30 million. Calculate the new EFN with this assumption. What does this imply about capacity utilization for East Coast Yachts next year?
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- east_coast_yachts.docx
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