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Problem: AFN equation
Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $5 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 7%, and the forecasted retention ratio is 45%. Use the AFN equation to forecast Carlsbad's additional funds needed for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.
Now assume the company's assets totaled $3 million at the end of 2016. Is the company's "capital intensity" the same or different comparing to initial situation?
Explain what accounting entries would be done and how the firm's earnings and balance sheet would be affected.
A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is not expected to grow. The return on equity for similar stocks is 12%. What is P 0? (Show workings)
When leasing, some business people consider that the risk of obsolescence and inflexibility is being transferred from the lessee to the lessor. How is the lessor induced to accept higher risk and greater inflexibility?
Lyman Nurseries purchased seeds costing $25,000 with terms of 3/15 net 30 EOM on January 12. How much will the firm pay if it takes the cash discount? What is the approximate cost of giving up the cash discount, using the simplified formula?
Consider the current asset accounts (Cash, Accounts Receivable, and Inventory) individually and as a group. What impact will the following transactions have on each account and current assets in total (Increase, Decrease, No Change)?
Distinguish between conventional mortgage loans and insured mortgage loans.
If you enter the above positions when gold equals 1,300, compare the dollars in profit from the three ways of betting against the price of gold if gold ends up at the following prices at time t: 1100, 1150, 1200, 1250, 1300, 1350, 1400, 1450, 1500..
Verano is considering a purchase of another business using equity financing. What is the appropriate cost of capital to evaluate the business?
What is the maximum initial cost the company would be willing to pay for the project?
a stock is bought for $22.00 and sold for $26.00 one year later, immediately after it has paid a didvidend of $1.50. What is the capital gain rate for this transaction?
The "Car Clean" company operates a car wash business. The company bought a machine 2 years ago at the price of $60,000. The life span of the machine is 6 years.
On 12 July 2007 call and put options to purchase and sell 10,000 euros at $1.37 per euro are traded on the Philadelphia options exchange.
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