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Long-term financing needed

At year-end 2011, total assets for Harley Davidson Inc. were $1.9 million and accounts payable were $340,000.

Sales, which in 2011 were $2.5 million, are expected to increase by 20% in 2012.

Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Harley Davidson typically uses no current liabilities other than accounts payable.

Common stock amounted to $415,000 in 2011, and retained earnings were $245,000. Harley Davidson plans to sell new common stock in the amount of $140,000. The firm's profit margin on sales is 6%; 50% of earnings will be retained.

1. What was Harley Davidson total debt in 2011? Round your answer to the nearest cent.

2. How much new long-term debt financing will be needed in 2012? Round your answer to the nearest cent. (Hint: AFN - New stock = New long-term debt.)

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9866954

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