Financial Management Theory and Practice: JAS Corporation - what amount of additional funds will be needed during the next year?
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This problem belongs to Financial Management Theory and practice 11e by Eugene F. Brigham, Chapter 14.
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JAS Corporation has a December 31, 2005 balance sheet as given below. All amounts shown are in $ millions:
Cash $ 10 Accounts payable $ 15
Accounts receivable 25 Notes payable 20
Inventory 40 Accrued wages and taxes 15
Net fixed assets 75 Long-term debt 30
Common equity 70_______
Total liabilities and equity
Total assets $150 $150
Sales during the past year were $100, and they are expected to rise by 50 percent to $150 during next year. Also, during last year fixed assets were being utilized to only 85 percent of capacity, so JAS could have supported $100 of sales with fixed assets that were only 85 percent of last year's actual fixed assets. As a result, net fixed assets are expected to increase to $95.62. Assume that JAS's profit margin will remain constant at 5 percent and that the company will continue to pay out 60 percent of its earnings as dividends. Construct a pro forma balance sheet. To the nearest whole dollar, what amount of additional funds will be needed during the next year?
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