Forecasted Statements and Ratios Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2021, is shown here (millions of dollars): Cash Receivables Inventories Total current assets Net fixed assets $ 3.5 Accounts payable 26.0 Notes payable 58.0 Line of credit $87.5 Accruals 35.0 Total current liabilities $9.0 18.0 0 8.5 $35.5 6.0 15.0 66.0 Mortgage loan Common stock Retained earnings Total assets $122.5 Total liabilities and equity $122.5 Sales for 2021 were $350 million, and net income for the year was $10.5 million, so the firm's profit margin was 3.0%. Upton paid dividends of $4.2 million to common stockholders, so its payout ratio was 40%. Its tax rate was 25%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2022. Do not round intermediate calculations. a. If sales are projected to increase by $66.5 million, or 19%, during 2022, use the AFN equation to determine Upton's projected external capital requirements. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million b. Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.
Forecasted Statements and Ratios Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2021, is shown here (millions of dollars): Cash Receivables Inventories Total current assets Net fixed assets $ 3.5 Accounts payable 26.0 Notes payable 58.0 Line of credit $87.5 Accruals 35.0 Total current liabilities $9.0 18.0 0 8.5 $35.5 6.0 15.0 66.0 Mortgage loan Common stock Retained earnings Total assets $122.5 Total liabilities and equity $122.5 Sales for 2021 were $350 million, and net income for the year was $10.5 million, so the firm's profit margin was 3.0%. Upton paid dividends of $4.2 million to common stockholders, so its payout ratio was 40%. Its tax rate was 25%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2022. Do not round intermediate calculations. a. If sales are projected to increase by $66.5 million, or 19%, during 2022, use the AFN equation to determine Upton's projected external capital requirements. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ million b. Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
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The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:Forecasted Statements and Ratios
Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff
to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2021, is shown here (millions of dollars):
$
Cash
Receivables
Inventories
Total current assets
Net fixed assets
million
%
$ 3.5 Accounts payable
26.0 Notes payable
58.0 Line of credit
$35.5
6.0
15.0
66.0
Total assets
$122.5
$122.5
Sales for 2021 were $350 million, and net income for the year was $10.5 million, so the firm's profit margin was 3.0%. Upton paid dividends of $4.2 million to
common stockholders, so its payout ratio was 40%. Its tax rate was 25%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous
liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2022. Do not round intermediate calculations.
$87.5 Accruals
35.0
a. If sales are projected to increase by $66.5 million, or 19%, during 2022, use the AFN equation to determine Upton's projected external capital
requirements. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal
places.
$9.0
18.0
0
8.5
Total current liabilities
Mortgage loan
Common stock
Retained earnings
Total liabilities and equity
b. Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to
employ nonspontaneous external funds? Round your answer to two decimal places.
Use the forecasted financial statement method to forecast Uinton's balance shoot for December 21 2022 Assume that all additional avtornalcanitalis
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