Requirement 2:Complete number one and either of numbers 2 or 3 below:

1.You are considering investing in Dakota's Security Services. You have been able to locate the following information on the firm: Total assets are $32 million, accounts receivable are $4.4 million, ACP is 25 days, net income is $4.66 million, and debt-to-equity is 1.2 times. All sales are on credit. Dakota's is considering loosening its credit policy such that ACP will increase to 30 days. The change is expected to increase credit sales by 5 percent. Any change in accounts receivable will be offset with a change in debt. No other balance sheet changes are expected. Dakota's profit margin will remain unchanged. How will this change in accounts receivable policy affect Dakota's net income, total asset turnover, equity multiplier, ROA, and ROE?

2. Last year,MarlyBrown, Inc., reported an ROE of 20 percent. The firm's debt-to-equity was 1.50 times, sales were $20 million, the capital intensity was 1.25 times, and dividends paid to common stockholders were $1,000,000. The firm has no preferred stock outstanding. This year,MarlyBrown plans to decrease its debt-to-equity ratio to 1.20 times. The change will not affect sales, total assets, or dividends paid; however, it will reduce the firm's profit margin to 9.85 percent. Use the DuPont equation to determine how the change inMarlyBrown's debt ratio will affect its internal growth rate.

3. You are considering investing in Annie's Eatery. You have been able to locate the following information on the firm: Total assets are $40 million, accounts receivable are $6.0 million, ACP is 30 days, net income is $4.75 million, debt-to-equity is 1.5 times, and dividend payout ratio is 45 percent. All sales are on credit. Annie's is considering loosening its credit policy such that ACP will increase to 35 days. The change is expected to increase credit sales by 5 percent. Any change in accounts receivable will be offset with a change in debt. No other balance sheet changes are expected. Annie's profit margin and dividend payout ratio will remain unchanged. Use the DuPont equation to determine how this change in accounts receivable policy will affect Annie's sustainable growth rate.