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Question
The Hudson River Line Company has a balance sheet as of the end of the year as follows:| Cash | $ 5,000 | Accounts payable | $15,000 | |
| Accounts receivable | 20,000 | Notes payable | 10,000 | |
| Inventories | 40,000 | Total current liab. | ||
| Total current assets | $ 65,000 | Long-term debt | 30,000 | |
| Fixed assets, net | 50,000 | Stockholders' equity | 60,000 | |
| Total assets | $115,000 | Total liabilities and equity | $115,000 |
Last year, the firm had sales of $148,750. This year the company expects sales to increase 25 percent, to generate earnings after tax of $16,000, and to pay a dividend of $5,000. Hudson operated its fixed assets at 85 percent capacity last year. What additional financing will be needed to support the sales increase?
a. $2,125
b. $4,625
c. $1,500
d. $375 surplus
Answer
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Related questions
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Q:
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a. there are no transactions costs for buying and selling securities
b. relevant information is readily available for individuals and is costless to obtain
c. all investors can borrow and lend at the same rate
d. All of these answers are correct.
Q:
Two prominent finance researchers (Modigliani and Miller) showed that
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b. the value of the firm is independent of its capital structure in perfect capital markets with no income taxes
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d. $25,000
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Q:
Kenzel has an EPS of $4.20 and sales are $9 million. If the firm has a degree of operating leverage of 4.0 and a degree of financial leverage of 5.2, forecast EPS if the firm expects a 4% sales decline.
a. $0.71
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c. $4.03
d. $3.33