4-26. Solution: Jordan Aluminum Supplies
Profit margin = Payout ratio =
Earn Earning ingss after after taxes taxes Sales Div Dividen idends ds Earnings
$18 $18, 000 000 30, 000
$30,000 $30,000 $300, 000
10%
60%
Change in Sales = 20% × $300,000 = $60,000 Spontaneous Assets = Current Asserts = Cash + Acc. Rec. + Inventory Spontaneous Liabilities = Acc. Payable + Accr. Wages + Accr. Taxes RNF=
=
A S
L
ΔS ΔS PS2 1 D
$90, 000 $300, 000
S
$60, 000
$12, 000 $300, 000
$60, 000 .10 $360, 000 1 .60
=.3 =.30 $60,000 ,000 .04 $60,000 ,000 .10 $360,000 ,000 .4 =$18,000 =$18,000 $2, $2, 400 400 $14,40 $14,400 0 RNF = $1, $1, 200
The firm needs $1,200 in external funds.
4-27. Solution: Cambridge Prep Shops
a.
Required New Funds = S
RNF
150 200
.75
A S
S
L S
S PS2 1 D
= 15% $200,000,000 $30,000,000
$30,000,000
60
$30, 000, 000
200 .12 $230,000,000 1 .4
$30,000,000 .30 $30,000,000 .12 $230,000,000 .6
$22,500,000 $9,000,000 $16,560,000
RNF = $3,060,000 A negative figure for required new funds indicates that an excess of funds ($3.06 mil.) is available for new investment. No external funds are needed.
