Financial modeling question. One of the clients is a large manufacturing firm. The firm is expected a strong level of sales growth which will lead to a higher net profit margin and will require an increase in new warehouses and new distribution centers. The firm's average collection period (ACP) will not be affected.

The manufacturing firm's CEO comments. "Due to higher expected profitability, our shareholders will likely expect a larger dividend. Therefore, we should increase our payout ratio."

Would this be a good recommendation to the firm to increase its payout ratio? Explain.