a) based on 20X2, what is the capital intensity ratio?

b) based on 20X2, what is full capacity of sales if it is operating at 80% capacity

c) what is the eternal growth rate for 20X2?

d) what is the sustainable growth rate for 20X2?

 

Use the following information for Delta Corporation to answer question 1: (20 marks total) Year 20x1 Net sales $1,500,000 Cost of goods sold 675,000 Depreciation 270,000 Interest paid 43,600 Cash Accounts receivable Inventory Net fixed assets Accounts payable Notes payable Long-term debt Common stock Retained earnings Tax rate Dividend payout 127,500 450,000 525,000 1,800,000 375,000 45,000 500,000 1,000,000 982,500 35% 30% 20x2 $1,656,598 745,469 298,188 44,000 140,811 496,980 579,809 1,987,918 414,150 50,000 500,000 1,000,000 1,241,368 35% 30% 1. Delta has 600,000 common shares outstanding. The firm is projecting a 20% Increase in net sales for the coming year (20X3). Delta uses the percentage of sales approach to plan for its financing needs. In using this approach, the firm assumes that cost of goods sold, all assets (current and fixed), and accounts payable will all remain a constant percentage of sales. Depreciation expense is assumed to be 15% of net fixed assets, while notes payable and long-term debt will remain at the same level as 20X2. The Interest rate charged on notes payable and long-term debt is also expected to remain the same. The firm will alm to maintain its dividend payout of 30% for the foreseeable future.