Q1) Cranberry Corporation: Income Statement ($ in millions)
Sales

$300

Costs

250

EBT

$50

Taxes (34%)

17

Net income

$33

Retained earnings

$22

Dividends

$11

Cranberry Corporation: Balance Sheet ($ in millions)
Cash

$5

Accounts payable

$ 40

Accounts receivables

40

Notes payable

30

Inventory

65

Current liabilities

$70

Current assets

$110

Longterm debt

155

Net plant & equip.

290

Common stock

75



Retained earnings

100

Total assets

$400

Total liab. & equity

$400

problems:
a. Suppose constant profit margin, determine Cranberry Corporation's net income be if sales increase by 10%?
b. Compute Cranberry Corporation's addition to retained earnings with 10% increase in sales? Suppose the dividend payout ratio and profit margin remains fixed.
c. Suppose Cranberry Corporation is operating at full capacity. Compute total assets be if sales increase by 10%? Suppose costs, current liabilities, and current assets differ directly with sales and that dividend payout ratio remains unchanged.
d. Suppose Cranberry Corporation is using its fixed assets at 90% capacity. Assume costs, current liabilities, and current assets differ directly with sales, and that dividend payout ratio remains unchanged. If sales increase by 20%, what will total fixed assets be?
e. How much external financing is required for a 20% increase in sales if Corporation is presently operating at full capacity? Suppose assets and costs differ directly with sales but no current liabilities increase with sales and that dividend payout ratio remains fixed.