Reference no: EM132988325

The Podrasky Corporation is considering a $200 million expansion program (capital expenditure) next year. The company wants to know approximately how much additional financing (if any) will be required if it decides to go through with the expansion program. The company currently has $400 million in net fixed assets on it books. Next year, the company expects to earn $80 million after interest and taxes. The company also expects to maintain its present level of dividends, which is $15 million. If the expansion program is accepted, the company expects its inventory and accounts receivables each to increase by approximately $20 million next year. Long-term debt retirement obligations total $10 million for next year, and depreciation is expected to be $80 million. The company maintains a cash balance of $5 million, which is sufficient for its present operations. If the expansion is accepted, the company feels it should increase its end-of-year cash balance to $8 million because of the increased level of activities.

Problem 1: For planning purposes, assume no other cash flow changes for next year.