Reference no: EM132036122
Problem
Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers.
Upton's balance sheet as of December 31, 2013, is shown here (millions of dollars):
Cash $ 3.5 Accounts payable $ 9.0
Receivables 26.0 Notes payable 18.0
Inventories 58.0 Line of credit 0
Total current assets $ 87.5 Accruals 8.5
Net fixed assets 35.0 Total current liabilities $ 35.5
Mortgage loan 6.0
Common stock 15.0
Retained earnings 66.0
Total assets $122.5 Total liabilities and equity $122.5
Sales for 2013 were $325 million and net income for the year was $9.75 million, so the firm's profit margin was 3.0%. Upton paid dividends of $3.9 million to common stockholders, so its payout ratio was 40%.
Its tax rate is 40%, and it operated at full capacity. Assume that all assets/sales ratios, spontaneous liabilities/sales ratios, the profit margin, and the payout ratio remain constant in 2014. Do not round intermediate calculations.
If sales are projected to increase by $40 million, or 12.31%, during 2014, use the AFN equation to determine Upton's projected external capital requirements.
Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
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