Girardo Mowers Inc. is a company that manufactures lawn mowers. It had net income of $ 15 million on revenues of $ 50 million last year, after depreciation charges of $ 10 million. Capital expenditures last year amounted to $ 16 million and total non-cash working capital was $ 10 million. The firm had a cash balance of $ 15 million and paid 50% of its earnings as dividends last year. There is no debt outstanding.

a. Assuming that revenues, capital expenditures and depreciation grow 10% a year and that net income grows 12% a year for the next four years, and that the non-cash working capital as a percent of revenues does not change over this period, estimate the cash balance at the end of year 4, if the company maintains its current payout ratio and borrows no money.

b. What proportion of earnings will Girardo Mowers have to pay out as dividends if the firm wants to to preserve its existing cash balance of $ 15 million at the end of 4 years?

C. Assuming that Girardo Mowers does not want to issue new stock and wants to maintain its existing payout ratio of 50% what debt ratio will the firm have to utilize over the next four years, to have a cash balance of $ 30 million at the end of the fourth year.