ADDITIONAL FUNDS NEEDED Morrissey Technologies Inc.’s 2014 financial statements are shown here.
Suppose that in 2015, sales increase by 10% over 2014 sales. The firm currently has 100,000 shares outstanding. It expects to maintain its 2014 dividend payout ratio and believes that its assets should grow at the same rate as sales. The firm has no excess capacity. However, the firm would like to reduce its Operating costs/Sales ratio to 87 5% and increase its total liabilities-to-assets ratio to 30%. (It believes its liabilities-to-assets ratio currently is too low relative to the industry average.) The firm will raise 30% of the 2015 forecasted interest bearing debt as notes payable, and it will issue long-term bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short-term and long-term debt) is 12 5%. Assume that any common stock issuances or repurchases can be made at the firm’s current stock price of $45.
a. Construct the forecasted financial statements assuming that these changes are made. What are the firm’s forecasted notes payable and long-term debt balances? What is the forecasted addition to retained earnings?
b. If the profit margin remains at 5% and the dividend payout ratio remains at 60%, at what growth rate in sales will the additional financing requirements be exactly zero? In other words, what is the firm’s sustainable growth rate?
They have a magnificent team. These people are always kind and willing to listen to your concerns or issues. Better yet, your assignment is always ready before the time, they usually send you a draft to double-check before they finalize your paper.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more