Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Broussard Skateboard's sales are expected to increase by 25% from $8.0 million in 2018 to $10.00 million in 2019. Its assets totaled $4 million at

Broussard Skateboard's sales are expected to increase by 25% from $8.0 million in 2018 to $10.00 million in 2019. Its assets totaled $4 million at the end of 2018. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2018, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 4%, and the forecasted payout ratio is 50%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar. $

Assume that the company's year-end 2018 assets had been $5 million. Is the company's "capital intensity" ratio the same or different?

The capital intensity ratio is measured as A0*/S0. Broussard's current capital intensity ratio is -Select-higher thanlower thanequal toItem 2 that of the firm with $5 million year-end 2018 assets; therefore, Broussard is -Select-lessmorethe sameItem 3 capital intensive - it would require -Select-a smallera largerthe sameItem 4 increase in total assets to support the increase in sales.

image text in transcribed

AFN equation Broussard Skateboard's sales are expected to increase by 25% from $8.0 million in 2018 to $10.00 million in 2019. Its assets totaled $4 milion at the end of 2018 Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2018, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 4%, and the forecasted payout ratio is 50%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar. $ The capital intensity ratio is measured as Ao"/50. Broussard's current capital intensity ratio is Select Assume that the company's year-end 2018 assets had been $5 millon. Is the company's "capital Intensity ratio the same or different? that of the firm with $5 million year-end 2018 assets; therefore, Broussard Is-Select capital intensive - it would require -Select- wincrease in total assets to support the increase in sales

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

Fundamentals Of Corporate Finance

Authors: David W Blackwell, Robert Parrino, David S Kidwell

1st Edition

0471270563, 9780471270560

More Books

Students also viewed these Finance questions