Question
Safelight is planning its operations for the coming year, and the CFO wants you to forecast the firm's additional funds needed (AFN). Data for use
Safelight is planning its operations for the coming year, and the CFO wants you to forecast the firm's additional funds needed (AFN). Data for use in the forecast are shown below. Based on the AFN equation, by how much would the AFN for the coming year change (indicate an increase or a decrease in AFN) if Safelight increased the dividend payout ratio from 20% to 25% and net profit margin decreased from 20% to 15%? All dollars are in millions.
| Last year's sales = S0 | $300 |
| Last year's accounts payable | $50.0 |
| Sales growth rate = g | 10% |
| Last year's notes payable (to bank) | $15.0 |
| Last year's spontaneous assets = A* | $500 |
| Last year's accruals | $20.0 |
| Last year's profit margin = PM | 20.0% |
| Initial dividend payout ratio | 20.0% |
| Expected profit margin = PM new | 15% |
| New dividend payout ratio | 25.0% |
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
