Accounting Mathematical Assistant

9/3/23, 5:56 PM Assignment Print View

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2. Award: 8.33 points    

The Cookie Shoppe expects sales of 1,800 next year. The profit margin is 5 percent and the firm has a 37 percent dividend payout ratio. What is the projected increase in retained earnings? NOTE: In the EFN questions, once you know how much money is needed to based on the growth in assets, you then need to subtract off the projected internal equity (new retained earnings) that will be used in part to finance those assets. We did this calculation in the lecture.

20.98

33.30

90.00

69.02

56.70

References

Multiple Choice Learning Objective: 04-1

Difficulty: Basic Section: 4.3

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9/3/23, 5:56 PM Assignment Print View

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3. Award: 8.33 points    

The most recent financial statements for Zoso, Inc., are shown here (assuming no income taxes):  

  Income Statement Balance Sheet   Sales $4,600    Assets $14,900    Debt $10,200     Costs  3,410       Equity 4,700  

    Net income $1,190      Total $14,900      Total $14,900  

  Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $5,967. What is the external financing needed? (Do not round your intermediate calculations.)   HINT: Start by calculating the growth in assets. Now we need to figure out how we will pay for the growth. Next subtract off from that needed amount  the estimated growth in internal equity (that is, the new retained earnings that current shareholders use to purchase some of those new assets). Whatever amount is left over is what we must raise in new, external financing. That financing may be in the form of new debt (new loans) or new equity (new shares of stock).  

$2,754

$3,164

$2,884

$2,634

$3,009

References

Multiple Choice Difficulty: Basic Learning Objective: 04-2

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9/3/23, 5:57 PM Assignment Print View

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4. Award: 8.33 points

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Calculating EFN - Excel

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Excel Simulation Difficulty: 1 Basic Section: 4.4 External Financing and Growth

Answer must be entered in formula

9/3/23, 5:57 PM Assignment Print View

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5. Award: 8.33 points

Major Manuscripts, Inc. 2009 Income Statement   Net sales 7,600 Cost of goods sold 6,715 Depreciation     200 Earnings before interest and taxes     685 Interest paid       20 Taxable Income   666 Taxes     232 Net income 434      Dividends 195

  Major Manuscripts, Inc.   2009 Balance Sheet   2009  2009

Cash 2,150  Accounts payable 1,650 Accounts rec. 840  Long-term debt 260 Inventory 2,300  Common stock 2,400 Total 5,290  Retained earnings 4,050 Net fixed assets 3,070  Total assets 8,360  Total liabilities & equity 8,360

Major Manuscripts, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 10 percent? HINT: Start by calculating the growth in assets. Now we need to figure out how we will pay for the growth. Start by subtracting off from that needed amount of new assets the estimated growth in internal equity (that it, the new retained earnings that will be used to purchase some of those new assets). Since current liabilities also grow proportional to sales in this problem, also subtract off the estimated growth in current liabilities (used to finance the purchase of current assets). Whatever amount is left over is what we must raise in new, long-term debt.

669

286

256

409

23

References

Multiple Choice Learning Objective: 04-2

Difficulty: Intermediate Section: 4.3

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9/3/23, 5:58 PM Assignment Print View

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6. Award: 8.33 points

Consider the following simplified financial statements for the Phillips Corporation (assuming no income taxes):

  Income Statement Balance Sheet   Sales $25,000    Assets $8,900    Debt $4,300     Costs 13,900     Equity 4,600  

  Net income $11,100    Total $8,900    Total $8,900  

Phillips has predicted a sales increase of 9 percent. It has predicted that every item on the balance sheet will increase by 9 percent as well. Calculate the dividend paid. (Do not round your intermediate calculations.)

HINT: Here you start by calculating the growth in assets (change in left hand side of balance sheet). We know that every category (debt and equity) on the right hand side of the Balance Sheet grows at the same rate as assets. So next we need to calculate the change in total equity because that change in equity is related to the new (pro forma) retained earnings. So next calculate the pro forma net income, and figure out how much can be paid in dividends (so that you have exactly the projected growth in equity left as your projected retained earnings). If the dividend is negative, then the firm will need to issue new shares of stock (can't finance growth in equity internally through retained earnings).

$11,673

$11,664

$11,685

$11,668

$19,898

References

Multiple Choice Difficulty: Basic Learning Objective: 04-1

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9/3/23, 5:58 PM Assignment Print View

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7. Award: 8.33 points

The most recent financial statements for Live Co. are shown here:

  Income Statement Balance Sheet   Sales $3,500      Current assets $3,720    Debt $7,438     Costs 2,310      Fixed assets 9,108    Equity 5,390  

  Taxable income $1,190        Total $12,828    Total $12,828  

  Taxes (33%) 393    

    Net income $797    

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 18 percent dividend payout ratio. No external equity financing is possible. What is the fastest rate at which the company can grow if only internal financing is used? (Do not round your intermediate calculations.)

HINT: You must know the difference between IGR and SGR.

13.8%

5.27%

5.47%

1.13%

5.37%

References

Multiple Choice Difficulty: Basic Learning Objective: 04-3

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9/3/23, 5:58 PM Assignment Print View

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8. Award: 8.33 points

The most recent financial statements for Live Co. are shown here:

  Income Statement Balance Sheet   Sales $16,000    Current assets $34,501    Debt $34,003     Costs 9,600    Fixed assets 24,142    Equity 24,640  

  Taxable income $6,400      Total $58,643      Total $58,643  

  Taxes (33%) 2,112  

    Net income $4,288  

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 38 percent dividend payout ratio. What is the fastest the company could grow while keeping the current debt- equity ratio constant and without issuing new shares? (Do not round your intermediate calculations.)

HINT: You must know the difference between IGR and SGR.

12.09 %

7.08 %

4.75 %

12.59 %

11.59 %

References

Multiple Choice Difficulty: Basic Learning Objective: 04-3

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9/3/23, 5:59 PM Assignment Print View

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9. Award: 8.37 points

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Calculating the sustainable growth rate - Excel

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Excel Simulation Difficulty: 1 Basic Section: 4.4 External Financing and Growth

Answer must be entered in formula

9/3/23, 6:00 PM Assignment Print View

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10. Award: 8.33 points    

Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of 0.55, a total asset turnover ratio of 1.30, and a profit margin of 9.0 percent. What must the dividend payout ratio be? HINT: Determine if the target growth rate is IGR/SGR. Next, use the formula to determine how much money (%) the firm can afford to payout to stockholders. You will also want to review the DuPont identity.

26.26 percent

38.87 percent

49.29 percent

61.13 percent

73.74 percent

References

Multiple Choice Learning Objective: 04-3

Difficulty: Intermediate Section: 4.4

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9/3/23, 6:00 PM Assignment Print View

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11. Award: 8.33 points

A firm wishes to maintain an internal growth rate of 7.6 percent and a dividend payout ratio of 30 percent. The current profit margin is 6 percent, and the firm uses no external financing sources.

What must total asset turnover be given the internal growth rate of 7.6 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Total asset turnover times

References

Worksheet Difficulty: Intermediate Learning Objective: 04-03 The determinants of a firms growth.

9/3/23, 6:01 PM Assignment Print View

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12. Award: 8.33 points

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Calculating maximum sales growth - Excel

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References

Excel Simulation Difficulty: 1 Basic Section: 4.3 The Percentage of Sales Approach

Answer must be entered in formula