Utilities,
insurance, etc.
2.5 2.2 2.4 2.5 2.5 2.8 2.7 2.5 2.6 2.6 2.6 2.4
Salaries—selling 60.0 62.0 65.8 62.8 62.7 67.9 71.6 62.8 64.9 66.9 68.0 65.0
Commissions 5.9 5.0 5.8 6.8 6.9 7.4 8.0 7.8 6.5 6.8 6.4 6.4
Travel 7.0 7.1 6.9 6.8 7.6 7.8 8.4 7.5 7.7 7.7 7.9 7.4
Advertising 6.0 6.5 7.0 9.0 8.5 8.7 8.3 8.1 7.0 7.2 6.0 7.5
Other charges—
selling
5.0 6.0 3.0 40.0 50.0 21.5 18.3 18.7 18.9 16.0 8.5 14.0
Salaries—
administration
35.0 35.0 34.0 33.0 36.0 36.0 38.0 39.0 35.0 33.0 32.0 34.0
Leasing 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8
Research and
development
8.3 10.3 15.6 7.5 8.3 7.7 7.9 6.2 6.7 6.9 6.3 8.3
Taxes 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3
Purchase of assets 40.0 45.0 33.0 350.0 500.0 16.8 23.8 23.0 18.0 20.0 20.0 10.0
SENSITIVITY ANALYSIS
. What would happen to New Tech’s need for external financing if sales
varied plus or minus 10%, 20%, and 30% from the forecasted level?
Prepare a sensitivity analysis.
. What would happen to New Tech’s financing needs if customers began to
pay 15% in the month of sale, 60% the month after, and the rest in 2
months? At least 3% bad debts remain.
BIBLIOGRAPHY
Brealey, Richard A. and Stewart C. Myers, Principles of Corporate Finance, ed 5, Irwin-
McGraw Hill, New York, 1996.
Brigham, Eugene F. and Phillip R. Daves, Intermediate Financial Management, ed 7, South-
Western, Mason, OH, 2002.
Copeland, Thomas E. and J. Fred Weston, Financial Management, ed 9, Dryden Press, Fort
Worth, Texas, 1992.
Jassy, Andrew R., Laurence Katz, Kevin Kelly, and Baltej Kochar, ‘‘Cash Management
Practices in Small Companies,’’ Harvard Business School Note, December 4, 1998.
Stancill, James McNeill, ‘‘When Is There Cash in Cash Flow?’’ Harvard Business Review,
March-April, 38–49, 1987.
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