Question
You have 10% of your capital financing in debt. You have annual sales of 500 million dollars and a net profit margin of 10%. Your
You have 10% of your capital financing in debt. You have annual sales of 500 million dollars and a net profit margin of 10%. Your total asset turnover is 1.5 to 1. Your total sales has been growing at 10% per year. You design and manufacture all items you sell. You have five (5) items for sale now and you have just introduced another item that should increase your total sales by 30%. After that the sales increase should be on going at 10% per year. You are using this new product introduction as the time to restructure your total production facilities which will cost 200 million dollars. You fill finance the expansion with debt. What debt structure will you offer and how will you take it to market? If there is any additional information you would like to know you are permitted to assume (within reason) the information you need. Identify any assumptions you make before you answer each scenario.
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