Question
The last year balance sheet for Laura Inc. is shown below (in millions of dollars): Cash $ 3.0 Accounts payable $ 2.0 Accounts receivable 3.0
The last year balance sheet for Laura Inc. is shown below (in millions of dollars):
Cash |
| $ 3.0 |
| Accounts payable |
| $ 2.0 |
Accounts receivable |
| 3.0 |
| Notes payable |
| 1.5 |
Inventory |
| 5.0 |
|
|
|
|
Current Assets |
| $11.0 |
| Current liabilities |
| $ 3.5 |
Fixed assets |
| 3.0 |
| Long-term debt |
| 3.0 |
|
|
|
| Common equity |
| 7.5 |
Total assets |
| $14.0 |
| Total liabilities and equity |
| $14.0 |
For the last year, sales were $60 million. For the next year, management believes that sales will increase by 30 percent to a total of $78 million. The profit margin is expected to be 6 percent, and the retention ratio is targeted at 40 percent. No excess capacity exists. How much can sales grow above the last year's level of $60 million without requiring any additional funds?
-
A. a. 10.34%
-
B. b. 13.64%
-
C. c. 14.83%
-
D. d. 15.63%
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E. e. 19.17%
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