I need some help coming to an answer with my question. I myself have two answers and just need to know if I am on the right track. Here is the question:
The Danville Company is considering a $50 Million expansion(capital expenditure) program next year. The company wants to determine approximately how much additional financing will be needed if the expansion program is undertaken. Next year the company expects to earn $25 million after interest and taxes. The company also plans to increase the dividends from $5 million to $7 million. If the expansion program is accepted, the company expects working capital requirements to increase by approximately $8 million next year. Long- Term debt retirement obligations total $3 million next year and depreciation is expected to be $13 Million. No fixed assets are expected to be sold next year. How much additional financing is needed?
Can you help me please?:confused:

The round figures have a resounding ring of homework...

OK, tell us what two answers you have come up with, and perhaps why you think each one could be right.

People will then give you advice on your answers to try and help you.

We are not here to give you the answers but will be gald to help you try to figure them out

Quote:

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Originally Posted by Fr_Chuck

ok, tell us what two answers you have come up with, and perhaps why you think each one could be right.

People will then give you advice on your answers to try and help you.

We are not here to give you the answers but will be gald to help you try to figure them out

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well the equations are:
[assets/sales(change in sales)-current liabilities/sales(change in sales)]-[Earnings after taxes- dividends]
the first answer I got was:
88,000,000/8,000,000(8,000,000)-3,000,000/8,000,000(8,000,000)-87,000,000(the 25million/.40 income taxe rate) -7,000,000 dividends = 4,500,000
63,000,000/8,000,000(8,000,000)-3,000,000/8,000,000(8,000,000)-87,000,000-7,000,000=20,000,000.
I just feel that I'm not doing something right