Question

LONG-TERM FINANCING NEEDED At year-end 2016, total assets for Arrington Inc. were $1.4 million and accounts payable were $395,000. Sales, which in 2016 were $3 million, are expected to increase by 30% in 2017. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $485,000 in 2016, and retained earnings were $215,000. Arrington plans to sell new common stock in the amount of $100,000. The firm's profit margin on sales is 5%; 45% of earnings will be retained. a. What were Arrington's total liabilities in 2016? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. b. How much new long-term debt financing will be needed in 2017? Write out your answer completely. For example, 25 million should be entered as 25,000,00 . Do not round your intermediate calculations. Round your answer to the nearest cent. (Hint: AFN - New stock = New long-term debt.) $

Answer 1

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12 e 5 W V 2 ENG R pravi mandura 09 01 2020 - 6 2 X BOND - Excel File Home Insert View Ho t ell me wiat you want to do Share X Cut Copy. Page Layout formules Data Review Calibri vu VAA== B I U . . .A = = Fort Wrap Text Merge & Center. 2 EX Insert Delete Format - - - Paste = Format Painter Clipboard . . % Number Conditional Format as Cell Formatting Table Styles - Styles AutoSum" AYO Sort & Find & Clear Filter - Select- Edeng Alignment 6 KG399 JY Z KA KBKC KDKE KF KG K H Total liabilities = Total liabilities = Total assets - common stock - retained earnings 1400000 - 485000 -215000 = 700000 JX 395 ARRINGTON 396 a 397 398 399b 400 401 calculation of AFN AFN = Increase in assets - Increase in current liabilities - Increase in retained earnings 420000 - 118500 - 87750 213750 402 note: increase in assets = 1400000 x 30% = increase in current liabilities = 395000 x 30% = increase in retained earnings = 420000 118500 87750 (sales*(1+increase)* (profit margin)*(retained earnings)] (=3000000*(1+0.3)*(5%)*(45%)] 403 404 405 406 407 408 409 410 411 412 413 new long term debt financing = AFN - common stock issued = 213750 - 100000 = 113750 Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $10 BIDDING, UNDERWRITING EUAC AW LIFE LP, IP, MAP, INFLATION WARRANI refund S5 YIELD SPOL Circular References: FV393 54 # !... P > -+ 150% Ready -