Suppose That the 2013 Actual and 2014 Projected Financial Statements

question 51

Multiple Choice

Suppose that the 2013 actual and 2014 projected financial statements for Counter Corp.are initially as shown in the following tables.In these tables,sales are projected to rise 35 percent in the coming year,and the components of the income statement and balance sheet that are expected to increase at the same 35 percent rate as sales are indicated with an italics font.Assuming that Counter Corp.wants to cover the AFN with 60 percent equity,25 percent long-term debt,and the remainder from notes payable,what amount of additional funds will they need to raise if debt carries an 8 percent interest rate?

• A)$217,260 equity; $90,525 long-term debt; $54,315 notes payable
• B)$217,260 equity; $90,525 notes payable; $54,315 long-term debt
• C)$54,315 equity; $90,525 long-term debt; $217,260 notes payable
• D)None of these answers is correct.

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Definitions:

Fixed Cost

Expenses that do not change in proportion to the activity of a business, such as rent or salaries.

Perfectly Competitive

A market structure characterized by many buyers and sellers, free entry and exit, homogenous products, and perfect information, leading to firms being price takers.

Demand Curve

A visual representation indicating the link between the price of an item and the quantity of it that buyers seek.

Market-determined Price

The price of a good or service as dictated by the forces of supply and demand in a competitive market, without external interventions.