Question
12-7 Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has
12-7 Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Uptons balance sheet as of December 31, 2013, is shown here (millions of dollars):
Cash | $5.45 | Accounts payable | 10.25 | |
Receivable | 21.00 | Notes payable | 13.00 | |
Inventories | 57.00 | Line of credit | 0.00 | |
Total current assets | 83.45 | Accruals | 8.30 | |
Net fixed assets | 65.00 | Total current liabilities | 31.55 | |
mortgage | 4.00 | |||
Common stock | 16.75 | |||
Retained earnings | 96.15 | |||
Total assets | 148.45 | Total liabilities and equity | 148.45 | |
Sales for 2013 were $361.00 million and net income for the year was $20.20 million, so the firms profit margin was 5.5956%. Upton paid dividends of $4.20 million to common stockholders, so its payout ratio was 33.75%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, spontaneous liabilities/sales ratios, the profit margin, and the payout ratio remain constant in 2014. b. Using the AFN equation, determine Uptons self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds?
Below are answer choices. choose one
13.44% |
12.29% |
11.49% |
12.86% |
11.94% |
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