Forecast yada ltd additional funds

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YADA Ltd's sales are expected to increase from RS million in 2015 to R6 million in 2016. Its assets totaled R3 million at the end of 2015 YADA Ltd is at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2015, current liabilities were R1 million, consisting of R250 000 of accounts payable, R500 000 of notes payable, and R250 000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use this information to answer questions (a), (b) and (c) below.

REQUIRED

(a) Use the AFN formula to forecast YADA Ltd's additional funds needed for the coming year 2016?

(b) What would the additional funds needed be if the company's year-end 2015 assets had been R4 million? Assume that all other figures are the same Why is this AFN different from the one you found in (a) above? Is the company's "capital intensity ratio the same or different?

(c) Return to the assumption that the company had R3 million in assets at the end of 2015, but assume that the company pays no dividends. Under these assumptions, what would be the add1t1onal funds needed for 2016? Why is this AFN amount different from the one you obtained in (a) above?

Reference no: EM132788077

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