Question No: 2 Al Salam Company is competing with local and foreign companies in the turmoil economy of the Middle East. Accordingly, the historical value will never tell the story of value creditworthiness and net worth of stockholders. The expected change in net working capital of the company in year (y+2) is 15%. This projected change is anticipated to equal 75 % of F.A. expansion in year (y+2). The total value of its assets in year (y+1) amounted to $42,000,000, its current liabilities-0.357, TA 0.75 CA and the company investment in year (y+1) was zero. This could be attributed to the company policy on investment and liquidity. To comply with tax regulations, the straight line method (SLM) was used to allocate cost of fixed assets. The DPR for the new fixed assets is decided to be 14% compared to 10 % for old fixed assets. To avoid dilution and to keep rights of old stockholders, the company is unlikely to issue new shares in the near future, provided that the company will stick to a retention rate of 60%, ROTA for year (y+2) is projected to be 12 %. Required: As a financial analyst, compute the expected change on debt (liabilities) provided that LTL a. will remain equal to zero. Figure out the implications of such policy on financial position of the company. b. c. What advice could you give to the management? Question No: 2 Al Salam Company is competing with local and foreign companies in the turmoil economy of the Middle East. Accordingly, the historical value will never tell the story of value creditworthiness and net worth of stockholders. The expected change in net working capital of the company in year (y+2) is 15%. This projected change is anticipated to equal 75 % of F.A. expansion in year (y+2). The total value of its assets in year (y+1) amounted to $42,000,000, its current liabilities-0.357, TA 0.75 CA and the company investment in year (y+1) was zero. This could be attributed to the company policy on investment and liquidity. To comply with tax regulations, the straight line method (SLM) was used to allocate cost of fixed assets. The DPR for the new fixed assets is decided to be 14% compared to 10 % for old fixed assets. To avoid dilution and to keep rights of old stockholders, the company is unlikely to issue new shares in the near future, provided that the company will stick to a retention rate of 60%, ROTA for year (y+2) is projected to be 12 %. Required: As a financial analyst, compute the expected change on debt (liabilities) provided that LTL a. will remain equal to zero. Figure out the implications of such policy on financial position of the company. b. c. What advice could you give to the management