Quantitative Problem 1: Beasley Industries\' sales are expected to increase from
ID: 2565593 • Letter: Q
Question
Quantitative Problem 1: Beasley Industries' sales are expected to increase from $4 million in 2017 to $5 million in 2018, or by 25%. Its assets totaled $3 million at the end of 2017. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2017, current liabilities are $780,000, consisting of $170,000 of accounts payable, $350,000 of notes payable, and $260,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and its dividend payout ratio is 50%. Using the AFN equation, forecast the additional funds Beasley will need for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.
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Quantitative Problem 2: Mitchell Manufacturing Company has $1,600,000,000 in sales and $210,000,000 in fixed assets. Currently, the company's fixed assets are operating at 75% of capacity.
A) What level of sales could Mitchell have obtained if it had been operating at full capacity? Round your answer to the nearest dollar. Do not round intermediate calculations.
$ ?????????
B) What is Mitchell's Target fixed assets/Sales ratio? Round your answer to two decimal places. Do not round intermediate calculations.
%?????????
C) If Mitchell's sales increase by 40%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio? Round your answer to the nearest dollar. Do not round intermediate calculations.
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Explanation / Answer
Actual funds needed=((A0/S0)*chnage in sales)--((L0/S0)*chnage in sales)-((M*Next year sales)*(1-payout))
Chnage in slaes=5mn-4mn=1mn
A0=3*10^6
S0=4*10^6
Lo=account payable+accrued liabilites
=170000+260000=430000
M=24
payout=50%
next year sales=5*10^6
=((3*10^6/4*10^6)*1*10^6)-((430000/4000000)*1000000)-(4%*5*10^6*50%)
=220000