Cranberry Corporation Income Statement ($ in millions)
|
Sales
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$300
|
|
Costs
|
250
|
|
EBT
|
mce_markernbsp; 50
|
|
Taxes (34%)
|
17
|
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Net income
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mce_markernbsp; 33
|
|
Retained earnings
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mce_markernbsp; 22
|
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Dividends
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mce_markernbsp; 11
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Cranberry Corporation Balance Sheet ($ in millions)
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Cash
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$5
|
|
Accounts payable
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$ 40
|
|
Accounts receivables
|
40
|
|
Notes payable
|
30
|
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Inventory
|
65
|
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Current liabilities
|
mce_markernbsp; 70
|
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Current assets
|
$110
|
|
Long-term debt
|
155
|
|
Net plant & equip.
|
290
|
|
Common stock
|
75
|
|
|
|
|
Retained earnings
|
100
|
|
Total assets
|
$400
|
|
Total liab. & equity
|
$400
|
[A] Suppose a constant profit margin, find Cranberry Corporation's net income be if sales increase by 10 percent?
[B] Find Cranberry Corporation's addition to retained earnings with a 10% increase in sales? Suppose the dividend payout ratio and profit margin remains fixed.
[C] Suppose Cranberry Corporation is operating at full capacity. What will total assets be if sales rise by 10 percent? Suppose costs, current liabilities, and current assets vary directly with sales and that the dividend payout ratio remains unchanged.
[D] Suppose Cranberry Corporation is using its fixed assets at 90% capacity. Suppose costs, current liabilities, and current assets vary directly with sales, and that the dividend payout ratio remains unchanged. If sales increase by 20 percent, what will total fixed assets be?
[E] How much external financing is needed for a 20% increase in sales if the Corporation is currently operating at full capacity? Suppose assets and costs vary directly with sales but no current liabilities increase with sales and that the dividend payout ratio remains fixed.