The Stipple Corporation, a plastics molding company, had the following year-end results: For next year, Stipple is making the following planning assumptions: - Revenue growth: 8.5% - IBT Margin: 1 percentage point higher than current year - Tax Rate: Unchanged at 21\% - Dividends: Same dollar amount as current year (no change) - Current Assets: Increase 2 percentage points faster than the sales growth rate - Net Fixed Assets: $2.5 million net increase - Long-Term Debt: Repay $1.0 million - Repurchase $1.9 million in common shares (a reduction in "Common Stock")| Questions: a. What amount of Short-term Debt will be needed in Box 1 to make this plan possible? (You will need to make a pro forma forecast of the table above to answer this question.) b. Your Bank informs you that your Short-Term Borrowing facility is now limited to $7,750,000. To comply with this cap, you decide to defer the purchase of a fifth injection molding center and thus cut the capital spending plan by $500,000 to a $2,000,000 net increase (instead of $2,500,000 increase); and you also decide to reduce the sales growth forecast. All the other parameters set out in Part (A) continue to apply. What is the new growth rate in sales in Box 2 (percentage to one decimal point, like x.x% ) that you can support with the credit constraint? The Stipple Corporation, a plastics molding company, had the following year-end results: For next year, Stipple is making the following planning assumptions: - Revenue growth: 8.5% - IBT Margin: 1 percentage point higher than current year - Tax Rate: Unchanged at 21\% - Dividends: Same dollar amount as current year (no change) - Current Assets: Increase 2 percentage points faster than the sales growth rate - Net Fixed Assets: $2.5 million net increase - Long-Term Debt: Repay $1.0 million - Repurchase $1.9 million in common shares (a reduction in "Common Stock")| Questions: a. What amount of Short-term Debt will be needed in Box 1 to make this plan possible? (You will need to make a pro forma forecast of the table above to answer this question.) b. Your Bank informs you that your Short-Term Borrowing facility is now limited to $7,750,000. To comply with this cap, you decide to defer the purchase of a fifth injection molding center and thus cut the capital spending plan by $500,000 to a $2,000,000 net increase (instead of $2,500,000 increase); and you also decide to reduce the sales growth forecast. All the other parameters set out in Part (A) continue to apply. What is the new growth rate in sales in Box 2 (percentage to one decimal point, like x.x% ) that you can support with the credit constraint
