1 Compute the additional financing needed by Mahony Services Inc. (MSI) if sales are expected to increase from a current level of $22 million to a new level of $26 million over the coming year. MSI expects earnings after taxes to equal $1 million over the next year (2014). MSI intends to pay a $400,000 dividend next year.

The current year balance sheet for MSI is as follows:

2 Mahony Machinery is attempting to develop and market a new quilting machine. Fixed costs to develop and produce the new quilting machine are estimated to be $8 million per year. The variable cost to make each machine has been estimated at $1,000. The marketing research department has recommended a price of $3,000 per machine.

A) What is the breakeven level of output for the new quilting machine?

B) If management expects to generate a target profit of $1.5 million from the machine each year, how many machines must be sold?

3 Mahony Company sells on terms of "net 30." Annual credit sales are $60 million, and its accounts receivable average 10 days overdue.

A) Determine Mahony Company's investment in receivables.

B) Suppose that annual credit sales decline by 10% and customers delay their payments to an average of 20 days past due. Determine the company's new level of receivables investment.