27) If a firm has excess capacity when calculating AFN (Additional Funds Needed), A* will most...
27) If a firm has excess capacity when calculating AFN (Additional Funds Needed), A* will most likely equal which of the following?
A) Total assets
B) Current assets
C) Fixed assets
D) Lumpy assets
28) The additional funds needed by the firm can be calculated by assuming which of the following?
A) The firm's additional sales will grow proportionately as
assets are purchased.
B) The firm's additional capital needed will grow proportionately
with projected changes in sales.
C) The firm's balance sheet will grow proportionately with
projected changes in sales.
D) The firm's additional sales will grow proportionately as capital
is brought on to the balance sheet.
41) Tykes Toys’ zero coupon bond has 10 years until maturity and the bonds are selling in the market for $650. If the firm's after-tax cost of debt is 11 percent, what was the firm's tax rate?
A) 25.00 percent
B) 30.00 percent
C) 40.00 percent
D) 250.00 percent
42) A firm uses only debt and equity in its capital structure. The firm's weight of equity is 35 percent. The firm's cost of equity is 14 percent and it has a tax rate of 30 percent. If the firm's WACC is 11 percent, what is the firm's before-tax cost of debt?
A) 13.41 percent
B) 6.10 percent
C) 5.50 percent
D) −3.00 percent
Homework Answers
27)
When a firm has excess capacity, fixed assets will not increase with increase in sales. Current assets only increase with increase in sales.
Hence, correct option is B) Current assets
Add Answer to:
27) If a firm has excess capacity when calculating AFN
(Additional Funds Needed), A* will most...
The Additional Funds Needed (AFN) equation
Green Moose Company has the following end-of-year balance sheet:Green Moose Company Balance Sheet For the Year Ended on December 31AssetsLiabilitiesCurrent Assets:Current Liabilities:Cash and equivalents$150,000Accounts payable$250,000Accounts receivable400,000Accrued liabilities150,000Inventories350,000Notes payable100,000Total Current Assets$900,000Total Current Liabilities$500,000Net Fixed Assets:Long-Term Bonds1,000,000Net plant and equipment$2,100,000Total Debt$1,500,000(cost minus depreciation)Common EquityCommon stock800,000Retained earnings700,000Total Common Equity$1,500,000Total Assets$3,000,000Total Liabilities and Equity$3,000,000The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Green Moose Company generated $350,000 net...
3. The Additional Funds Needed (AFN) equation Bohemian Manufacturing Company has the following end-of-year balance sheet:...
3. The Additional Funds Needed (AFN) equation Bohemian Manufacturing Company has the following end-of-year balance sheet: Bohemian Manufacturing Company Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents $250,000 Accounts receivable $150,000 400,000 350,000 $900,000 Accounts payable Accrued liabilities Notes payable 150,000 Inventories Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) Total Current Liabilities Long-Term Bonds Total Debt 100,000 $500,000 1,000,000 $1,500,000 $2,100,000 Common Equity Common...
Which of the following statements about the financial planning process is correct? The additional funds needed...
Which of the following statements about the financial planning process is correct? The additional funds needed (AFN) is estimated by summing the expected changes in assets and liabilities that fluctuate with sales and then subtracting the expected operating income. The projected balance sheet method requires only the balance sheet to determine a firm's expected financial needs. The decision as to how a firm should raise additional funds needed (AFN) to meet its financial goals depends on the ability of the...
2. The Additional Funds Needed (AFN) equation Green Moose Industries has the following end-of-year balance sheet:...
2. The Additional Funds Needed (AFN) equation Green Moose Industries has the following end-of-year balance sheet: Green Moose Industries Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Accounts payable $250,000 Cash and equivalents Accounts receivable Accrued liabilities 150,000 $150,000 400,000 350,000 $900,000 Inventories Notes payable Total Current Liabilities Long-Term Bonds Total Debt 100,000 $500,000 1,000,000 Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) $2,100,000 $1,500,000 Common Equity Common...
1. The Additional Funds Needed (AFN) equation Green Moose Company has the following end-of-year balance sheet:...
1. The Additional Funds Needed (AFN) equation Green Moose Company has the following end-of-year balance sheet: Green Moose Company Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents $150,000 Accounts payable $250,000 Accounts receivable 400,000 Accrued liabilities 150,000 Inventories 350,000 Notes payable 100,000 Total Current Assets $900,000 Total Current Liabilities $500,000 Net Fixed Assets: Long-Term Bonds 1,000,000 Net plant and equipment $2,100,000 Total Debt $1,500,000 (cost minus depreciation) Common Equity Common...
1. The Additional Funds Needed (AFN) equation Blue Elk Manufacturing has the following end-of-year balance sheet:...
1. The Additional Funds Needed (AFN) equation Blue Elk Manufacturing has the following end-of-year balance sheet: Blue Elk Manufacturing Balance Sheet For the Year Ended on December 31 Liabilities Assets Current Assets: Current Liablities: Accounts payable Cash and equivalents $150,000 $250,000 Accounts receivable Accrued liabilities 400,000 150,000 Notes payable 350,000 Inventories 100,000 Total Current Assets $900,000 Total Current Liabilities $500,000 Net Fixed Assets: Long-Term Bonds 1,000,000 Net plant and equipment $2,100,000 Total Debt $1,500,000 (cost minus depreciation) Common Equity Common...
2. More on the AFN (Additional Funds Needed) equation Blue Elk Manufacturing reported sales of $720,000...
2. More on the AFN (Additional Funds Needed) equation Blue Elk Manufacturing reported sales of $720,000 at the end of last year; but this year, sales are expected to grow by 9%. Blue Elk expects to maintain its current profit margin of 22% and dividend payout ratio of 30%. The firm's total assets equaled $475,000 and were operated at full capacity. Blue Elk's balance sheet shows the following current liabilities: accounts payable of $75,000, notes payable of $35,000, and accrued...
2. More on the AFN (Additional Funds Needed) equation Blue Elk Manufacturing reported sales of $890,000...
2. More on the AFN (Additional Funds Needed) equation Blue Elk Manufacturing reported sales of $890,000 at the end of last year; but this year, sales are expected to grow by 6%. Blue Elk expects to maintain its current profit margin of 21% and dividend payout ratio of 25%. The firm's total assets equaled $400,000 and were operated at fll capacity. Blue Elk's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $40,000, and accrued...
3. More on the AFN (Additional Funds Needed) equation Aa Aa E Cold Duck Manufacturing Inc....
3. More on the AFN (Additional Funds Needed) equation Aa Aa E Cold Duck Manufacturing Inc. reported sales of $743,000 at the end of last year, but this year, sales are expected to grow by 7%. Cold Duckexpects to maintain its current profit margin of 22% and dividend payout ratio of 20%. The firm's total assets equaled $475,000 and were operated at full capacity. Cold Duck's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of...
. More on the AFN (Additional Funds Needed) equation Fuzzy Button Clothing Company reported sales of...
. More on the AFN (Additional Funds Needed) equation Fuzzy Button Clothing Company reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 6%. Fuzzy Button expects to maintain its current profit margin of 23% and dividend payout ratio of 25%. The following information was taken from Fuzzy Button's balance sheet: Total assets: Accounts payable: Notes payable: Accrued abilities: $400,000 $70,000 $35,000 $75,000 Based on the equation, the firm's AFN for...
3. The Additional Funds Needed (AFN) equation Bohemian Manufacturing Company has the following end-of-year balance sheet: Bohemian Manufacturing Company Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents $250,000 Accounts receivable $150,000 400,000 350,000 $900,000 Accounts payable Accrued liabilities Notes payable 150,000 Inventories Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) Total Current Liabilities Long-Term Bonds Total Debt 100,000 $500,000 1,000,000 $1,500,000 $2,100,000 Common Equity Common...
2. The Additional Funds Needed (AFN) equation Green Moose Industries has the following end-of-year balance sheet: Green Moose Industries Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Accounts payable $250,000 Cash and equivalents Accounts receivable Accrued liabilities 150,000 $150,000 400,000 350,000 $900,000 Inventories Notes payable Total Current Liabilities Long-Term Bonds Total Debt 100,000 $500,000 1,000,000 Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) $2,100,000 $1,500,000 Common Equity Common...
1. The Additional Funds Needed (AFN) equation Green Moose Company has the following end-of-year balance sheet: Green Moose Company Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents $150,000 Accounts payable $250,000 Accounts receivable 400,000 Accrued liabilities 150,000 Inventories 350,000 Notes payable 100,000 Total Current Assets $900,000 Total Current Liabilities $500,000 Net Fixed Assets: Long-Term Bonds 1,000,000 Net plant and equipment $2,100,000 Total Debt $1,500,000 (cost minus depreciation) Common Equity Common...
1. The Additional Funds Needed (AFN) equation Blue Elk Manufacturing has the following end-of-year balance sheet: Blue Elk Manufacturing Balance Sheet For the Year Ended on December 31 Liabilities Assets Current Assets: Current Liablities: Accounts payable Cash and equivalents $150,000 $250,000 Accounts receivable Accrued liabilities 400,000 150,000 Notes payable 350,000 Inventories 100,000 Total Current Assets $900,000 Total Current Liabilities $500,000 Net Fixed Assets: Long-Term Bonds 1,000,000 Net plant and equipment $2,100,000 Total Debt $1,500,000 (cost minus depreciation) Common Equity Common...
2. More on the AFN (Additional Funds Needed) equation Blue Elk Manufacturing reported sales of $720,000 at the end of last year; but this year, sales are expected to grow by 9%. Blue Elk expects to maintain its current profit margin of 22% and dividend payout ratio of 30%. The firm's total assets equaled $475,000 and were operated at full capacity. Blue Elk's balance sheet shows the following current liabilities: accounts payable of $75,000, notes payable of $35,000, and accrued...
2. More on the AFN (Additional Funds Needed) equation Blue Elk Manufacturing reported sales of $890,000 at the end of last year; but this year, sales are expected to grow by 6%. Blue Elk expects to maintain its current profit margin of 21% and dividend payout ratio of 25%. The firm's total assets equaled $400,000 and were operated at fll capacity. Blue Elk's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $40,000, and accrued...
3. More on the AFN (Additional Funds Needed) equation Aa Aa E Cold Duck Manufacturing Inc. reported sales of $743,000 at the end of last year, but this year, sales are expected to grow by 7%. Cold Duckexpects to maintain its current profit margin of 22% and dividend payout ratio of 20%. The firm's total assets equaled $475,000 and were operated at full capacity. Cold Duck's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of...
. More on the AFN (Additional Funds Needed) equation Fuzzy Button Clothing Company reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 6%. Fuzzy Button expects to maintain its current profit margin of 23% and dividend payout ratio of 25%. The following information was taken from Fuzzy Button's balance sheet: Total assets: Accounts payable: Notes payable: Accrued abilities: $400,000 $70,000 $35,000 $75,000 Based on the equation, the firm's AFN for...
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