Assessment of dynatronics financial performance

Assignment Help Finance Basics

Reference no: EM1355776

1. What is your assessment of Dynatronics' financial performance over the period 1986-1988? What strengths or weaknesses, if any, do you see?

2. What sustainable growth problems, if any, has Dynatronics experienced over the past several years? How does the company appear to have addressed these problems? Should management be concerned about any potential growth problems in coming years?

a). Assuming Dynatronics does not invest in the new product line, estimate the company's need for external financing over next three years. Make whatever assumptions you feel are appropriate. Please state your assumptions and explain the more important or controversial ones.

b). Absent the new product line, does it appear that Dynatronics will be able to get by relying on its existing bank loan secured by accounts receivable, or will they need to raise additional money from some other source?

4. On page 3 of the case Ms. Kraft uses a target capital structure of 60% debt and 40% equity to estimate Dynatronics's WACC.

a). Considering the company's 1988 balance sheet and any other relevant information, do you think this capital structure is appropriate for estimating the company's WACC, if not, what capital structure would you recommend?

b). Using your recommended capital structure and Ms. Kraft's after-tax costs of debt and equity, estimate a revised WACC for Dynatronics.

c). Dynatronics adds 4.3 percentage points to its estimated WACC "in recognition of the tendency for the forecasts to be optimistic." Do you agree with this practice? Why or why not?

5. The following questions relate to the proposed new product line.

a). Prepare a table indicating the cash flows that are relevant for evaluating the new product line.

b). Some company executives argue that R&D expenses should be included as a relevant cash flow for evaluating the new product line. They reason that continued R&D spending is critical to the long-run success of the company and to maintain this spending, all new products should pay for their fair share of the cost of developing future new products. If today's products cannot support future R&D, they argue, the company will wither and die. Do you agree? Why, or why not?

c). Does the line appear financially attractive? Why, or why not?

6. Without preparing an entirely new pro forma forecast, prepare a rough estimate of the effect the new product line will have on the company's need for external financing over the coming three years. Does it appear the company can safely finance the new product line using its existing accounts receivable financing line?

7. What advice would you give Ms. Kraft about the financial challenges and opportunities presently facing Dynatronics?

Reference no: EM1355776

Questions Cloud

Calculating total inventory destroyed in fire : A fire completely destroyed the entire inventory of Printing Delight Company on April 10, 2014. Fortunately, the books were not destroyed in the fire. The following information is taken from the books of Printing Delight Company for January 1 to A..

Canadian code of ethics for psychologists : Which Decision Making Model Do YOU prefer? Choose one: The model outlined in Bersoff's commentary on p.146 - 147, OR the Ethical Decision Making Process as outlined in the Canadian Code of Ethics for Psychologists

Elucidate the resulting paint cost per gallon : Illustrate what percentage of G1 can be mixed with G2 and still satisfy the customers. Elucidate the resulting paint cost per gallon.

Pl-sql block to display last name and salary : Write a PL/SQL block that displays the last name and salary of the following people. Each of these can be done separately as PL/SQL, first to test and get the output lines then encapsulated.

Assessment of dynatronics financial performance : Determine assessment of Dynatronics' financial performance over the period 1986-1988? What strengths or weaknesses, if any, do you see?

What was the angular speed of the wheel at the beginning : An object has a kinetic energy of 303 J and the momentum of magnitude 22.9 kg·m/s. Find the speed and the mass of the object.

Psychological testing versus ongoing psychotherapy : whether such limitations should be different depending upon the nature of the service provided (i.e., psychological testing versus ongoing psychotherapy). Provide at least one valid reference.

Find the magnitude of the electric field in the wire : A copper wire has a square cross section 2.7 on a side. The wire is 3.8 long and carries a current of 4.0 . The density of free electrons is 8.5*10^28 m^-3.

Elucidate in economic terms perplexing situation : Yet medicines with brand names that the man recognizes from TV commercials sell for more than the unadvertised versions. Elucidate in economic terms, this perplexing situation to the father.

User Account

All Pages