Question 1. As you are trying to get a better grasp of the growth potential of the company, you decide to look the the IGR and SGR numbers.

1. Compute the IGR and SGR.

2. What do each of those mean?

One of your analysts mentioned that the Marketing and Sales departments are forecasting a growth in sales of 10%. Additionally, the same analyst informed you that the firm is at capacity right now and any further growth would require an investment in fixed assets of $5 million dollars. Before your meeting with the new CEO, you decided to get a sense of what the impact of such growth would be:

3. What is the EFN for a growth of 10% in sales and the capacity assumption above? Also assume that the dividend payout ratio remains constant, and that cost of goods sold, current assets and accounts payable grow proportionally to sales.
4. What does the number you computed mean?

5. Suppose you decide to raise any needed capital through long term debt with no interest payments in the coming year. What is your new Debt-Equity Ratio? Is it larger or smaller than the Debt-Equity Ratio you currently have? Does it contradict the IGR or SGR you computed before? Why is that?

Typewritten answers only, please. No handwritten answers. Thank you.

You just stared a new job as a Firance Maager al XYZ Corp. As you are startig o get acquainted with the company, you requested the Balance Sheet for the iscal Year 2018, the Incorme Staternent and a few other iterns that you deemed appropriate. You can find all of hose in able below and in the Exc ached Income Statement for Fiscal Year 2018 Sales COGS Other expenses $5,000,000 Depreciation $43,000,0O0 $30,000,000 $2,000,000 $6,000,000 $2,000,000 $4,000,000 $1,600,000 $2,400,000 EBIT Interest Taxable income Taxes (40%) Net income Dividends Add to RE $600,000 $1,800,000 Balance Sheet, Fiscal Year 2018 Liabilities & Owners Equity Current Liabilities 1 ssets Current Asset:s $500,000 Acconts Receivable 1,000,000 $2,000,000 $3,500,000 Accounts Payabl $1,000,000 $3,000,000 $4,000,000 Long Term Debt $10,000,00 Notes Payable Inventorv Total CL Total CA Fixed Assets Nel PP&E Owners Equity $25,000,000 Common Stock $6,500,000 Retained Earnings $8,000,000 l'otal Equity $14,500,000 $28,500,000 Total Assets $28,500,000 Total T. & OF Additional in formation axes Market-to-Book Ratio 1.25 Shares Outstanding 1,000,000 Not The Market-to-Book Ratio is oqual to tho Markot Valuc per Share divided by tho Book Value per Share. The Book Value per Share is the TotalOwners Equity dividedby the numberofoutstanding shares This alid ollier mancial slatellieills l'aluos can be found o[11Hper 3 in Ihetexlbook. You just stared a new job as a Firance Maager al XYZ Corp. As you are startig o get acquainted with the company, you requested the Balance Sheet for the iscal Year 2018, the Incorme Staternent and a few other iterns that you deemed appropriate. You can find all of hose in able below and in the Exc ached Income Statement for Fiscal Year 2018 Sales COGS Other expenses $5,000,000 Depreciation $43,000,0O0 $30,000,000 $2,000,000 $6,000,000 $2,000,000 $4,000,000 $1,600,000 $2,400,000 EBIT Interest Taxable income Taxes (40%) Net income Dividends Add to RE $600,000 $1,800,000 Balance Sheet, Fiscal Year 2018 Liabilities & Owners Equity Current Liabilities 1 ssets Current Asset:s $500,000 Acconts Receivable 1,000,000 $2,000,000 $3,500,000 Accounts Payabl $1,000,000 $3,000,000 $4,000,000 Long Term Debt $10,000,00 Notes Payable Inventorv Total CL Total CA Fixed Assets Nel PP&E Owners Equity $25,000,000 Common Stock $6,500,000 Retained Earnings $8,000,000 l'otal Equity $14,500,000 $28,500,000 Total Assets $28,500,000 Total T. & OF Additional in formation axes Market-to-Book Ratio 1.25 Shares Outstanding 1,000,000 Not The Market-to-Book Ratio is oqual to tho Markot Valuc per Share divided by tho Book Value per Share. The Book Value per Share is the TotalOwners Equity dividedby the numberofoutstanding shares This alid ollier mancial slatellieills l'aluos can be found o[11Hper 3 in Ihetexlbook