Quein financial management

$(20$ marks $)$

Fast Mawar Bhd is a company that manufactures box 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.

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.

$(7$ marks $)$

What proportion of earnings will Fast Mawar have to be pay out as dividends if the firm wants to to preserve its existing cash balance of $$15$ million at

the end of $4$ years?

$(7$ marks $)$

Assuming that Fast Mawar does not want to issue new shares 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.

$20$ marks $)$