Question
Brown & Sons recently reported sales of $100 million, and net income equal to $5 million. The company has $70 million in total assets. Over
Brown & Sons recently reported sales of $100 million, and net income equal to $5 million. The company has $70 million in total assets. Over the next year, the company is forecasting a 20 percent increase in sales. Since the company is at full capacity, its assets must increase in proportion to sales. The company also estimates that if sales increase 20 percent, spontaneous liabilities will increase by $5.6 million. If the company's sales increase, its profit margin will remain at its current level. The company's dividend payout ratio is 60 percent. Based on the AFN formula, how much additional capital must the company raise in order to support the 20 percent increase in sales?
THanks!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started