Problem Six: Need for External Financing

question 22

Essay

Problem Six: Need for External Financing
Yeats Corporation is trying to determine its short-term cash needs. Given the following
information, how much money will Yeats need to borrow next year?
● Sales in Year 9 are expected to be $500M
● Operating Margin is expected to be 8%
● Interest expense is expected to be $6M (ignore additional interest expense generated by additional borrowings in Year 9)
● Tax rate is 40%
● Dividend payout ratio is 30%
● Increase in working capital is 5% of sales
● Increase in fixed assets is 10% of sales
● No new equity will be issued

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Definitions:

Medicaid Program

A government-funded program in the United States providing health coverage to eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities.

Federal Government

The national government of a federation, made up of separate states, where powers are divided between the national government and the state governments.

Path To Citizenship

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Obama Administration

The executive branch of the U.S. government from 2009 to 2017, led by President Barack Obama, the 44th President of the United States.