question archive Your company has the following balance sheet (in millions of dollars): Current assets $4
Your company has the following balance sheet (in millions of dollars): Current assets $4
Subject:BusinessPrice: Bought3
Your company has the following balance sheet (in millions of dollars):
Current assets $4.0 Accounts payable $0.8
Net fixed assets 4.0 Notes payable 1.0
Accrued wages and taxes 0.2
Total current liabilities $2.0
Long-term debt 1.5
Common equity 1.5
Retained earnings 3.0
Total assets $8.0 Total liabilities and equity $8.0 You have determined the following facts: (1) last year's sales were $10 million; (2) the company will pay out 40 percent of earnings as dividends; (3) a profit margin of 3 percent is projected; (4) fixed assets were used to full capacity; and (5) all assets as well as spontaneous liabilities as shown on the balance sheet are expected to grow proportionally with sales. Further, your boss estimates she will need to raise $2 million externally by issuing new debt or common stock next year. If the above assumptions hold, what rate
of sales growth is your boss expecting? (Hint: You can use the AFN equation to help answer this problem.)
a. 12.50%
b. 15.25%
c. 18.00%
d. 23.15%
e. 31.96%
