Question

In: Finance

Chapter 16 Spreadsheet Problem Financial Planning and Control Use the model in File C16 to solve...

Chapter 16 Spreadsheet Problem Financial Planning and Control Use the model in File C16 to solve this problem. Stendardi Industries’ financial statements for the past year are shown in the following tables. Stendardi Industries: Balance Sheet as of December 31 ($ million) Cash $ 4.0 Accounts payable $ 8.0 Receivables 12.0 Notes payable 5.0 Inventories 16.0 Current liabilities $13.0 Current assets $32.0 Long-term debt 12.0 Net fixed assets 40.0 Common stock 20.0 Retained earnings 27.0 Total assets $72.0 Total liabilities and equity $72.0 Stendardi Industries: Balance Sheet as of December 31 ($ million) Sales $ 80.0 Operating costs (71.3) Earnings before interest and taxes $ 8.7 Interest ( 2.0) Earnings before taxes $ 6.7 Taxes (40%) ( 2.7) Net income $ 4.0 Dividends (40%) $ 1.60 Addition to retained earnings $ 2.40 Assume that the firm has no excess capacity in fixed assets, the interest rate for short-term debt is 10 percent, the interest rate for long-term debt is 12 percent, and that the projected annual sales growth rate for the next five years is 15 percent. a. Stendardi plans to finance its additional funds needed with 50 percent short-term debt and 50 percent long-term debt. Using the projected balance sheet method, prepare the firm’s pro forma financial statements for the next five years. Determine the following: (1) the additional funds needed, (2) the current ratio, (3) the debt ratio, (4) the return on equity (ROE) and the return on assets (ROA), (5) profit margin, and (6) the total assets turnover. b. Sales growth could be five percentage points higher or lower than the projected 15 percent. Determine the effect of such variances on AFN and the key ratios. c. Perform an analysis to determine the sensitivity of AFN and the forecasted key ratios for Year 5 to changes in the dividend payout ratio as specified in the following, assuming that sales grow at a constant 15 percent. What happens to Stendardi’s AFN if the dividend payout ratio (1) increases from 40 percent to 70 percent or (2) decreases from 40 percent to 20 percent?

Solutions

Expert Solution


Related Solutions

Instructions to solve the problem: You are required to use a financial calculator or spreadsheet (Excel)...
Instructions to solve the problem: You are required to use a financial calculator or spreadsheet (Excel) to solve the problem related to the cost of capital. You are required to show the following 3 steps for the problem. (i) Describe and interpret the assumptions related to the problem. (ii) Apply the appropriate mathematical model to solve the problem. (iii) Calculate the correct solution to the problem. Submit all answers as percentages and round to two decimal places. Problem: Cosa Nostra...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the provided...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the provided capital budgeting problem (sample questions and solutions are provided for guidance). Problem: Windrunner Corp. is considering a new machine that requires an initial investment of $800,000 installed and has a useful life of 10 years. The expected annual after-tax cash flows for the machine are $120,000 during the first 5 years, $150,000 during years 6 through 8 and $180,000 during the last two years....
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the following...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the following capital budgeting problem (sample questions and solutions are provided for guidance): Kingston Corp. is considering a new machine that requires an initial investment of $520,000 installed, and has a useful life of 8 years. The expected annual after-tax cash flows for the machine are $76,000 during the first 3 years, $87,000 during years 4 through 6 and $92,000 during the last two years. (i)...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the following...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the following capital budgeting problem (sample questions and solutions are provided for guidance): Windrunner Corp. is considering a new machine that requires an initial investment of $800,000 installed, and has a useful life of 10 years. The expected annual after-tax cash flows for the machine are $120,000 during the first 5 years, $150,000 during years 6 through 8 and $180,000 during the last two years. (i)...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the problems...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve the problems (provided on page 4) related to risk and return characteristics and stock/bond valuation. You are required to show the following three steps for each problem (sample problems and solutions are provided for guidance): (i) Describe and interpret the assumptions related to the problem. (ii) Apply the appropriate mathematical model to solve the problem. (iii) Calculate the correct solution to the problem. A company’s stock...
You are required to use a financial calculator or spreadsheet (Excel) to solve the following capital...
You are required to use a financial calculator or spreadsheet (Excel) to solve the following capital budgeting problem (sample questions and solutions are provided for guidance): Windrunner Corp. is considering a new machine that requires an initial investment of $800,000 installed, and has a useful life of 10 years. The expected annual after-tax cash flows for the machine are $120,000 during the first 5 years, $150,000 during years 6 through 8 and $180,000 during the last two years. (iii) Calculate...
You are required to use a financial calculator or spreadsheet (Excel) to solve the following capital...
You are required to use a financial calculator or spreadsheet (Excel) to solve the following capital budgeting problem (sample questions and solutions are provided for guidance): Windrunner Corp. is considering a new machine that requires an initial investment of $800,000 installed, and has a useful life of 10 years. The expected annual after-tax cash flows for the machine are $120,000 during the first 5 years, $150,000 during years 6 through 8 and $180,000 during the last two years. (i) Develop...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve related to...
Instructions: You are required to use a financial calculator or spreadsheet (Excel) to solve related to the risk and return, stocks and bonds valuation. You are required to show the following 3 steps for each problem (sample questions and solutions are provided for guidance): (i) Describe and interpret the assumptions related to the problem. (ii) Apply the appropriate mathematical model to solve the problem. (iii) Calculate the correct solution to the problem. PROBLEM: Consider a 10 year bond with face...
You are required to use a financial calculator or spreadsheet (Excel) to solve 10 problems related...
You are required to use a financial calculator or spreadsheet (Excel) to solve 10 problems related to the cost of capital. You are required to show the following 3 steps for each problem: (i) Describe and interpret the assumptions related to the problem. (ii) Apply the appropriate mathematical model to solve the problem. (iii) Calculate the correct solution to the problem. Round all answers to two decimal places. Lee Airlines plans to issue 25-year bonds with a par value of...
You are required to use a financial calculator or spreadsheet (Excel) to solve 10 problems related...
You are required to use a financial calculator or spreadsheet (Excel) to solve 10 problems related to the cost of capital. You are required to show the following 3 steps for each problem: (i) Describe and interpret the assumptions related to the problem. (ii) Apply the appropriate mathematical model to solve the problem. (iii) Calculate the correct solution to the problem. Round all answers to two decimal places Fisheye Inc. is investing in a new project costing $20 million. It...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT