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APT Security?s sales are expected to increase from R4 m in 200

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APT Security?s sales are expected to increase from R4 m in 2009 to;R5m in 2010, or by 25%. Its assets totaled R3 m at the end of 2009. APT;is at full capacity, so its assets must grow at the same rate as projected;sales. At the end of 2009, current liabilities were R800 000, consisting of;R200 000 of accounts payable, R400 000 of notes payable, and R200;000 of accruals. The after-tax profit margin is forecasted to be 5%, and;the forecasted payout ratio is 60%. Use this information to answer;questions (a), (b) and (c) below.;(a) Use the AFN formula to forecast APT Security?s additional funds;needed for the coming year.;(b) What would be the additional funds needed if APT?s;year end 2009 assets had been R3.5 m? Assume that all other;numbers are the same. Why is this AFN different from the one you;found in (a) above? Is the company?s ?capital intensity? the same or;different?;(c) Return to the assumption that the company had R3 m in assets at;the end of 2009, but now assume that the company pays no;dividends. Under these assumptions, what would be the;additional funds needed for the coming year? Why is this AFN;different from the one you found in (a) above?

 

Paper#32084 | Written in 18-Jul-2015

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