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    Foundations of Financial Management by Block, Hirt, Danielsen 4 - 26, 27

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    The document contains information about the earnings, sales, dividends, and calculation of required new funds for two companies - Jordan Aluminum Supplies and Cambridge Prep Shops. For Jordan Aluminum, earnings were $30,000 on sales of $300,000 with a dividend payout of 60%. Required new funds were calculated to be $1,200. For Cambridge Prep Shops, sales increased by $30 million from $200 million to $230 million, with a profit margin of 12%. The calculation showed an excess of funds available of $3.06 million, so no external funds were needed.

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    Foundations of Financial Management by Block, Hirt, Danielsen 4 - 26, 27

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    rick_labrador
    2K views2 pages
    The document contains information about the earnings, sales, dividends, and calculation of required new funds for two companies - Jordan Aluminum Supplies and Cambridge Prep Shops. For Jordan Aluminum, earnings were $30,000 on sales of $300,000 with a dividend payout of 60%. Required new funds were calculated to be $1,200. For Cambridge Prep Shops, sales increased by $30 million from $200 million to $230 million, with a profit margin of 12%. The calculation showed an excess of funds available of $3.06 million, so no external funds were needed.

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    Chapter 4- 26, 27

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    Foundations of Financial Management by Block, Hirt, Danielsen 4- 26, 27

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    The document contains information about the earnings, sales, dividends, and calculation of required new funds for two companies - Jordan Aluminum Supplies and Cambridge Prep Shops. For Jordan Aluminum, earnings were $30,000 on sales of $300,000 with a dividend payout of 60%. Required new funds were calculated to be $1,200. For Cambridge Prep Shops, sales increased by $30 million from $200 million to $230 million, with a profit margin of 12%. The calculation showed an excess of funds available of $3.06 million, so no external funds were needed.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    2K views2 pages

    Foundations of Financial Management by Block, Hirt, Danielsen 4 - 26, 27

    Uploaded by

    rick_labrador
    The document contains information about the earnings, sales, dividends, and calculation of required new funds for two companies - Jordan Aluminum Supplies and Cambridge Prep Shops. For Jordan Aluminum, earnings were $30,000 on sales of $300,000 with a dividend payout of 60%. Required new funds were calculated to be $1,200. For Cambridge Prep Shops, sales increased by $30 million from $200 million to $230 million, with a profit margin of 12%. The calculation showed an excess of funds available of $3.06 million, so no external funds were needed.

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    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    4-26.

    Solution:
    Jordan Aluminum Supplies
    Earnings after taxes $30, 000
    Profit margin =  10%
    Sales $300, 000
    Dividends $18, 000
    Payout ratio =   60%
    Earnings 30, 000

    Change in Sales = 20% × $300,000 = $60,000

    Spontaneous Assets = Current Asserts = Cash + Acc. Rec. +


    Inventory

    Spontaneous Liabilities = Acc. Payable + Accr. Wages + Accr.


    Taxes
    A L
    RNF=  ΔS   ΔS  PS2  1  D 
    S S

    $90,000 $12,000
    =  $60,000    $60,000   .10  $360,000   1  .60 
    $300,000 $300,000

    =.30  $60,000   .04  $60,000   .10  $360,000   .4 

    = $18,000  $2,400  $14, 400

    RNF = $1, 200

    The firm needs $1,200 in external funds.


    4-27. Solution:
    Cambridge Prep Shops
    A L
    Required New Funds =  S   S  PS2  1  D 
    a. S S
    S = 15%  $200,000,000  $30, 000, 000

    150 60
    RNF   $30,000,000    $30,000,000 
    200 200
     .12  $230,000,000   1  .4 

     .75  $30,000,000   .30  $30,000,000 


     .12  $230,000,000   .6 

     $22,500,000  $9,000,000  $16,560,000

    RNF =  $3,060,000 

    A negative figure for required new funds indicates that an


    excess of funds ($3.06 mil.) is available for new investment.
    No external funds are needed.

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