Reference no: EM133073198
A. Daniel Sawyer, the CEO of the Sawyer Group, is initiating planning for the company's operations next year, and he wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.
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Last year's sales = S0
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$350
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Last year's accounts payable
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$40
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Sales growth rate = g
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30%
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Last year's notes payable
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$50
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Last year's total assets = A0*
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$450
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Last year's accruals
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$30
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Last year's profit margin = PM
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5%
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Target payout ratio
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60%
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B. In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
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Last year's sales = S0
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$200,000
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Last year's accounts payable
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$50,000
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Sales growth rate = g
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40%
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Last year's notes payable
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$15,000
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Last year's total assets = A0*
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$145,000
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Last year's accruals
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$20,000
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Last year's profit margin = PM
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20.0%
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Target payout ratio
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25.0%
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C. You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), which is planning its operation for the coming year. The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 60%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions.
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Last year's sales = S0
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$300.0
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Last year's accounts payable
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$50.0
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Sales growth rate = g
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40%
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Last year's notes payable
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$15.0
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Last year's total assets = A0*
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$500
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Last year's accruals
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$20.0
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Last year's profit margin = PM
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20.0%
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Initial payout ratio
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10.0%
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D. Last year Baron Enterprises had $575 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year. In millions, by how much could Baron's sales increase before it is required to increase its fixed assets?
E. Weber Interstate Paving Co. had $450 million of sales and $225 million of fixed assets last year, so its FA/Sales ratio was 50%. However, its fixed assets were used at only 40% of capacity. If the company had been able to sell off enough of its fixed assets at book value so that it was operating at full capacity, with sales held constant at $450 million, how much cash (in millions) would it have generated?