Question
Firm QTP currently has sales of $9 million with an asset base of $25 million. QTP has no accounts payable, a net profit margin of
Firm QTP currently has sales of $9 million with an asset base of $25 million. QTP has no accounts payable, a net profit margin of 10%, and a dividend payout ratio of 60%.
A) If QTP decides to increase sales by 22 %, how much external funds required (EFR) are necessary? Round your answer to two decimal places. $ 5.06 million
B) Assuming QTP now has accounts payable of $0.5 million, what is the EFR? Round your answer to two decimal places. $4.95 million
C) In addition to having these accounts payable, QTP decides to cut its dividend, making the dividend payout ratio equal to 45%. What then is the associated EFR? Round your answer to two decimal places. $4.79 million
D) Based on the signaling model of dividends, should QTP increase or decrease the dividend to indicate its new plan to sales expansion? Increase
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