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Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Please showing your work in a MS-Excel spreadsheet 4. Last year Jain Technologies had $250 million of sales and $100 million of fixed assets, so its FA/Sales ratio was 40%. However, its fixed assets were used at only 75% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set? a. 28.5% b. 30.0% correct answer c. 31.5% d. 33.1% e. 34.7% 5. Howton & Howton Worldwide (HHW) is planning its operations for the coming year, and the CEO wants you to forecast the firm's additional funds needed (AFN). 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 50%, 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. Last year?s sales = S0 $300.0 Last year?s accounts payable $50.0 Sales growth rate = g 40% Last year?s notes payable $15.0 Last year?s total assets = A0* $500.0 Last year?s accruals $20.0 Last year?s profit margin = PM 20.0% Initial payout ratio 10.0% a. $31.9 b. $33.6 correct answer. c. $35.3 d. $37.0 e. $38.9

 

Paper#8527 | Written in 18-Jul-2015

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