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tester [92]
3 years ago
15

Hugh buys a new calculator for $125 from the PaperMills stationery store. A week later, he sees an ad from another stationery st

ore, StationMax, selling the same calculator for $65. Hugh feels guilty about having wasted so much money on the calculator but justifies his action by saying that StationMax items are always of poor quality. In the context of attitudes, Hugh's statement reflects an attempt to reduce his
Business
1 answer:
tamaranim1 [39]3 years ago
8 0

Answer:

Hugh's statement is an attempt to reduce his frustration about buying the product at a more expensive price.

Explanation:

Human beings always try to find a reason to justify their actions, even if that particular action was a bad one.

Hugh bought a calculator for $125 from one store and the next week, he saw the same calculator being advertised for a significantly lower amount. He felt cheated and he immediately blamed himself for being cheated when there was a better deal out there. As a way to make himself feel better about the ordeal, he tells himself that the product quality from the second store is always known to be of an inferior quality.

This is a defence mechanism to cover or try to hide our frustrations and anger at things not going our way so we invent something that will make us immediately feel better about ourselves and our decision.

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Sales and costs are projected to grow at 20% a year for at least the next 4 years. Both current assets and accounts payable are
shusha [124]

Question Completion:

The 2017 financial statements for Growth Industries are presented below  

INCOME STATEMENT, 2017  

Sales $ 380,000  

Costs 240,000  

EBIT $ 140,000  

Interest expense 28,000  

Taxable income $ 112,000  

Taxes (at 35%) 39,200

Net income $ 72,800  

Dividends 21,840

Addition to retained earnings 50,960  

BALANCE SHEET, YEAR -END, 2017  

Assets    

Current assets  

Cash      $ 7,000      

Accounts receivable 12,000

Inventories 31,000

Total current assets $ 50,000  

Net plant and equipment 320,000

Total assets $ 370,000

Liabilities

Current liabilities

Accounts payable $ 14,000

Total current liabilities $14,000

Long-term debt Stockholders' equity 280,000

Common stock plus additional paid-in capital 15,000

Retained earnings 61,000  

Total liabilities and stockholders' equity $ 370,000

Answer:

Growth Industries

The required external financing over the next year is:

= $16,600.

Explanation:

a) Data and Calculations:

Sales and costs projected growth rates = 20%

Current assets and accounts payable growth rates = 20%

Fixed assets growth rates = 20%

Interest expense = 10% of long-term debt outstanding

Dividend payout ratio = 0.40

INCOME STATEMENTs,               2017        Projected

Sales                                      $ 380,000   $456,000 ($380,000 * 1.2)

Costs                                        240,000      288,000 ($240,000 * 1.2)

EBIT                                        $ 140,000    $168,000

Interest expense                       28,000        28,000

Taxable income                     $ 112,000    $140,000

Taxes (at 35%)                          39,200        49,000

Net income                            $ 72,800      $91,000

Dividends                                   21,840       36,400

Addition to retained earnings 50,960    $54,600

Retained earnings, 2017  $61,000

Projected addition             54,600

Retained earnings,         $115,600

BALANCE SHEET, YEAR -END, 2017  

Assets                                                                2017   Projected

Current assets  

Cash                                                               $ 7,000      $8,400 ($7,000*1.2)

Accounts receivable                                       12,000       14,400 (12,000*1.2)

Inventories                                                      31,000      37,200 (31,000*1.2)

Total current assets                                   $ 50,000   $60,000

Net plant and equipment                           320,000    384,000 ($320,000*1.2)

Total assets                                             $ 370,000 $ 444,000

Liabilities

Current liabilities

Accounts payable                                     $ 14,000      $16,800 ($14,000*1.2)

Total current liabilities                               $14,000      $16,800

Long-term debt Stockholders' equity     280,000     280,000

Common stock plus

additional paid-in capital                           15,000        15,000

Retained earnings                                      61,000      115,600

Total liabilities

and stockholders' equity                    $ 370,000  $427,400

External Financing Required = Assets - Liabilities & equity

Assets =                    $444,000

Liabilities + Equity = $427,400

External financing      $16,600

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