Samba Berhad is a company that manufactures Golf Carts. It had net income of $ 150 million on revenues of $ 500 million last year, after depreciation charges of $ 100 million. Capital expenditures last year amounted to $ 160 million and total non-cash working capital was $ 100 million. The firm had a cash balance of $ 150 million and paid 50% of its earnings as dividends last year. There is no debt outstanding.

a. 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.

b. What proportion of earnings will Samba Bhd have to pay out as dividends if the firm wants to preserve its existing cash balance of $ 15 million at the end of 4 years?

c. Assuming that Samba Bhd does not want to issue new stock 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.