(Liquidity Analysis) The King Carpet Company has $2,960,000 in cash and a total of $11,530,000 in current assets. The firm's current liabilities equal $5,920,000 such that the firm's current ratio equals 1.9.The company's managers want to reduce the firm's cash holdings down to $1,140,000 by paying $540,000 in cash to expand the firm's truck fleet and using $1,280,000 in cash to retire a short-term note. If theycarry this plan through, what will happen to the firm's current ratio?The new current ratio is(Round to one decimal place.)

The current ratio shows the paying capacity to meet short-term liabilities with the available amount…

Answered: (Liquidity Analysis) The King Carpet…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 1nM

See similar textbooks

Similar questions

The King Carpet Company has $2,910,000 in cash and a total of $12,780,000 in current assets. The firm's current liabilities equal $5,940,000 such that the firm's current ratio equals 2.2. The company's managers want to reduce the firm's cash holdings down to $1,160,000 by paying $591,000 in cash to expand the firm's truck fleet and using $1,159,000 in cash to retire a short-term note. If they carry this plan through, what will happen to the firm's current ratio?
(Liquidity Analysis) The King Carpet Company has $3,150.000 in cash and a total of $12,480,000 in curent assets. The firm's current liabilities equal 56,670,000 such that the firm's current ratio equals 1.9. The company's managers want to reduce the firm's cash holdings down to $1,040,000 by paying $556,000 in cash to expand the fem's truck feet and using $1,554,000 in cash to retre a short-term note if they carry this plan through, what will happen to the firm's current ratio? The new current ratio is (Round to one decimal place) -CHED-
The King Carpet Company has $3,010,000 in cash and a total of $12,110,000 in current assets. The firm's current liabilities equal $5,630,000 such that the firm's current ratio equals 2.2 The company's managers want to reduce the firm's cash holdings down to $1,180,000 by paying $560,000 in cash to expand the firm's truck fleet and using $1,270,000 in cash to retire a short-term note. If they carry this plan through, what will happen to the firm's current ratio? The new current ratio is ? (round 2 decimals)
Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets and $1 million in current liabilities. The firm currently pays out 75 percent of its net income to shareholders. Assume that all assets and current liabilities are expected to grow with sales. If Goldilochs does not want to rely on any external sources of funds, what is the most sales can grow (in chars)? $187,900 $299,900 $328,800 $364,100
Airspot Motors, Inc. has $2,343,600 in current assets and $868,000 in current liabilities. The company's managers want to increase the firm's inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below 2.1 (assuming all other current assets and current liabilities remain constant)?
Jupiter Inc.’s directors are considering expanding their operations in foreign markets. They estimate that the cost of expansion is approximately $42 million. The company’s CFO has estimated that new foreign operations will generate the following cash flows: Year 1 = $2,120,000 Year 2 = $2,838,000 Year 3 = $3,480,000 Year 4 = $4,570,000 Year 5 onward, the cash flow stream is going to stabilize at $5,500,000 which is going to continue forever. Given that the company’s required rate of return is 11%, what is the NPV of the project?
Longhorn, Incorporated, has produced rodeo supplies for over 20 years. The company currently has a debt-equity ratio of 55 percent and the tax rate is 23 percent. The required return on the firm’s levered equity is 14 percent. The company is planning to expand its production capacity. The equipment to be purchased is expected to generate the following unlevered cash flows: Year Cash Flow 0 −$ 18,400,000 1 5,740,000 2 9,540,000 3 8,840,000 The company has arranged a debt issue of $9.42 million to partially finance the expansion. Under the loan, the company would pay interest of 9 percent at the end of each year on the outstanding balance at the beginning of the year. The company also would make year-end principal payments of $3,140,000 per year, completely retiring the issue by the end of the third year. What is the APV of the project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)
Airport Motors, Inc. has $2,305,800 in current assets and $854,000 in current liabilities. The managers want to increase the firm’s inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below a 2.1, (assuming all other current assets and current liabilities remain constant)?
Awkward Inc. currently has $2,145,000 in current assets and $858 in current liabilities. The company's managers want to increase the firm inventory, which will be financed by short-term note with the bank. What level of inventories can the firm carry without its current ratio falling below 2.0?
LAFCO Industries believes that its two primary product lines, automotive and commercial aircraft valves, are becoming obsolete rapidly. Its free cash flow is diminishing quickly as it loses market share to new firms entering its industry. LAFCO has $200 million in debt outstanding. Senior management expects the automotive and commercial aircraft valve product lines to generate $25 and 15 million, respectively, in earnings EBITDA next year. The operating liabilities associated with these two product lines are minimal. Senior management also believes that it will not be able to upgrade these product lines because of declining cash flow and excessive current leverage. A competitor to its automotive valve business last year sold for 10 times EBITDA. Moreover, a company similar to its commercial aircraft valve product line sold last month for 12 times EBITDA. Estimate LAFCO's breakup value before taxes.
Copmany A. has $2,491,100 in current assets and $859,000 in current liabilities. The company's managers want to increase the firm's inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below 2.2 (assuming all other current assets and current liabilities remain constant)?
Give typed solution The King Carpet Company has $2,820,000 in cash and a total of $11,170,000 in current assets. The firm's current liabilities equal $6,560,000 such that the firm's current ratio equals 1.7. The company's managers want to reduce the firm's cash holdings down to $1,010,000 by paying $576,000 in cash to expand the firm's truck fleet and using $1,234,000 in cash to retire a short-term note. If they carry this plan through, what will happen to the firm's current ratio? The new current ratio is______?

SEE MORE QUESTIONS

Recommended textbooks for you

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS