Answer A-C Homework: Chapter 17 Homework Save Score: 0 of 1 pt 2 of 6 (1 complet

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Answer A-C

Homework: Chapter 17 Homework Save Score: 0 of 1 pt 2 of 6 (1 complete)> HW Score: 0.98%, 0.06 of 6 pts P17-3 (similar to) Question Help (Financial forecasting-percent of sales) Tulley Appliances, Inc. projects next year's sales to be $20.1 million. Current sales are at $15.3 million, based on current assets of $5.1 million and fixed assets of $5.1 million. The firm's net profit margin is 5.1 percent after taxes. Tulley forecasts that current assets will rise in direct proportion to the increase in sales, but fixed assets will increase by only $101,000. Currently, Tulley has $1.3 million in accounts payable (which vary directly with sales), $2.1 million in long-term debt (due in 10 years), and common equity (including $3.9 million in retained eamings) totaling $6.4 million. Tulley plans to pay $536,000 in common stock dividends next year a. What are Tulley's total financing needs (that is, total assets) for the coming year? b. Given the firm's projections and dividend payment plans, what are its discretionary financing needs? c. Based on your projections, and assuming that the $101,000 expansion in fixed assets will occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of financing? Estimate Tulley's financing needs by completing the pro forma balance sheet Round the percentages of sales to two decimal places and the balance sheet amounts to the nearest dollar.) Tulley Appliances, Inc Pro Forma Balance Sheet Next Year % of Sales Current assets Net fixed assets Total assets Arrnunte navablos Enter any number in the edit fields and then click Check Answer Clear Al Check Answer

Explanation / Answer

(a) The sales this year = 15.3 Million

Sales next year = 20.1 Million

The % increase in sales = (20.1-15.3)/15.3 = 31.37%

The calculation of total financing needs (Total assets) is as shown below:

(a) Total financing needs (Total assets) = $1,190,100

(b) Net Income = 5.1% of 20.1 Million = 0.051*20,100,000 =1,025,100

Dividends = 536,000

Addition to retained earnings = 1,025,000 - 536,000 = 489,000

(b) Discretionary financing = 1,204,056.86

(c) Based on the projections , the sales has to actually decrease by 8.50% to 14 Million so that there is no sources of discretionary financing

Answer = Sales reduce by 8.50% or (-8.50%)

Assets Current assets 6700000 Fixed Assets 5201000 Total assets 11901000

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