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Acc206

In: Business and Management

Submitted By mcclay516
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Final Paper
Cindy D. McClay
ACC: Principles of Accounting II (CBI1543A)
Carolyn Woods
22 November 2015

FINAL PAPER As the controller of ABC Company, the CEO has come to me with a new opportunity that he’s been working on. The CEO would like to use the some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time-intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABC’s existing manufacturing facilities as well as the current staff. Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on me to help decide how this project can be afforded I will be providing details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide. I order to start, we will go ahead and do a company cash flow using the direct method. We will examine what the cash flow says about the funds and if there are ways to improve the cash flow. We will also be suggesting any additional financing beyond what the ABC is providing internally. As we can see from the direct method, the statement shows that the company has a surplus of $180,000, invested $100,000 in fixed assets and $100,000 are paid out as dividend to stock holders. The company can only improve its cash flow position by cutting the dividends. The project can be financed with the current cash flow, as the cash position of the company is good. Furthermore, the company can cut down the dividend percentage, if required to meet the cash demand. Finally, the company should go for corporate debt as the company seems to be financially good so why should the company go for the equity option. ABC Company believes

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