Ceramic Structures has experienced rapid growth over the past several years. Sales are expected to grow at 15% per year
Posted: Sun Jun 05, 2022 7:33 am
Ceramic Structures has experienced rapid growth over the past
several years. Sales are expected
to grow at 15% per year for the next three years. Sales growth has
been fueled by aggressive
pricing as well as increased use of ceramics in high performance
engines.
Asset growth has been financed by internal funds as well as the
increased use of debt. At the end
of 2018, the debt was restructured with a new 10% seven-year loan
with principal payments of
$1 million per year. In addition a $1.5 million working capital
line was negotiated in 2017. It
was increased to $2.5 million in 2019 and $3.5 million in 2020.
Interest is charged at prime +
1%. (For class, we will use 9%.)
Cash balances will be kept around $250,000 and the credit line will
average $2 million.
2) If expected sales growth fell to 8% per year, what would be
Ceramic’s need for funds?
several years. Sales are expected
to grow at 15% per year for the next three years. Sales growth has
been fueled by aggressive
pricing as well as increased use of ceramics in high performance
engines.
Asset growth has been financed by internal funds as well as the
increased use of debt. At the end
of 2018, the debt was restructured with a new 10% seven-year loan
with principal payments of
$1 million per year. In addition a $1.5 million working capital
line was negotiated in 2017. It
was increased to $2.5 million in 2019 and $3.5 million in 2020.
Interest is charged at prime +
1%. (For class, we will use 9%.)
Cash balances will be kept around $250,000 and the credit line will
average $2 million.
2) If expected sales growth fell to 8% per year, what would be
Ceramic’s need for funds?