(A, B, and C) You have been given the attached information on the Crum Company. Crum expects sales to grow by 20 percent in the next year and operating costs should increase in proportion to sales. Fixed assets were being operated at 75 percent of capacity in the most recent year, but all other assets were used to full capacity. The company plans to finance any external funds needed as 40 percent long-term debts and 60 percent common stock. The interest rate is 9 percent. The dividend payout ratio will remain constant.

Most Next Years Next Year

Recent Year Forecast After AFN

Sales $2,000.00

Operating costs 1,600.00

EBIT $ 400.00

Interest 40.00

EBT $ 360.00

Taxes (40%) 144.00

Net Income $216.00

Dividends (40%) 86.40

Addition to R.E. $ 129.60

Current Assets $ 600.00

Net fixed Assets 400.00

Total assets $1,000.00

A/P and Accruals $ 150.00

N/P 100.00

Long-term debts 200.00

Common stock 150.00

Retained earnings 400.00

Total Liab. & Equity $1,000.00

A) What is Crum's projected interest?

B & C) next questions.

What is Crum's projected ROE using the percentage of sales method?

Select one:

a. $270

b. $90

c. $180

d. $52

e. $240