You have been asked to forecast the additional funds needed (AFN) for a firm, 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 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 the firm increased the payout from 10% to the new and higher level? All euros 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% AFN = (A0*/S0)DS - (L0*/S0)DS - Profit margin ´ S1 ´ (1 -Payout)
You have been asked to
|
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% |
AFN = (A0*/S0)DS - (L0*/S0)DS - Profit margin ´ S1 ´ (1 -Payout)
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
