Happiness Inc is experiencing sales growth.You are hired to help them project their capital requirements for next year.Whatworking capital increasesandPP&E investmentsshould they be prepared for given the following.If you make any assumptions, please state them.

Current Year:

Revenue: $100 million

COGS: $65 million

Working Capital: $40 million

PP& E: $200 million

Next Year:

Sales Forecast Projects: $125 million in Revenue

COGS will remain the same as a % of sales, as will Asset Turnover

a)Given the answer to the prior question, what impact will maintaining the same efficiency ratios have on the firm as sales grow rapidly?

b) Given a WACC of 10% and a tax rate of 30%, what % increase in firm value did the sales jump create?

c) Given the investment in PP&E required and the capital requirements, do you think the firm will be able to maintain its current capital ratio? How will that impact the valuation from above?