Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Blue Elk Manufacturing reported sales of $743,000 at the end of last year, but this year, sales are expected to grow by 7%. Blue Elk

image text in transcribed

Blue Elk Manufacturing reported sales of $743,000 at the end of last year, but this year, sales are expected to grow by 7%. Blue Elk expects to maintain its current profit margin of 20% and dividend payout ratio of 25%. The following information was taken from Blue Elk's balance sheet: Total assets: $450,000 Accounts payable: $80,000 Notes payable: $35,000 Accrued liabilities: $75,000 Based on the AFN equation, the firm's AFN for the current year is A positively signed AFN value represents: A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. out Because of its excess funds, Blue Elk Manufacturing is thinking about raising its dividend payout ratio to satisfy shareholders. Blue Elk could pay of its earnings to shareholders without needing to raise any external capital.(Hint: What can Blue Elk increase its dividend payout ratio to before the AFN becomes positive?)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Consumer Finance Research

Authors: Jing J. Xiao

1st Edition

1441926046, 978-1441926043

More Books

Students also viewed these Finance questions