Mars Corporation is interested in estimating the expected rate of sales growth sustainability and additional financing needed to support improvements fast sales next year. Last year, revenue was $5.5 million; net profit is $500,000; investment in assets is $2,500,000; payables and accruals are $1,000,000; and shareholder equity at the end of the year is $1,500,000 (that is, the equity at the beginning of the year of $1,000,000 plus retained earnings of $500,000). The business does not pay dividends and does not expect to pay dividends in the future. b. Calculate the net profit of Mars Corporation with the condition of the net profit margin is 5 percent. What is the value of equity at the end? Also calculate the new sustainable sales growth. Give your opinion
Mars Corporation is interested in estimating the expected rate of sales growth sustainability and additional financing needed to support improvements fast sales next year. Last year, revenue was $5.5 million; net profit is $500,000; investment in assets is $2,500,000; payables and accruals are $1,000,000; and shareholder equity at the end of the year is $1,500,000 (that is, the equity at the beginning of the year of $1,000,000 plus retained earnings of $500,000). The business does not pay dividends and does not expect to pay dividends in the future. b. Calculate the net profit of Mars Corporation with the condition of the net profit margin is 5 percent. What is the value of equity at the end? Also calculate the new sustainable sales growth. Give your opinion
Chapter12: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 2STP
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Mars Corporation is interested in estimating the expected rate of sales growth
sustainability and additional financing needed to support improvements
fast sales next year. Last year, revenue was $5.5 million; net profit is
$500,000; investment in assets is $2,500,000; payables and accruals are $1,000,000; and
shareholder equity at the end of the year is $1,500,000 (that is, the equity at the beginning of the year
of $1,000,000 plus retained earnings of $500,000). The business does not pay
dividends and does not expect to pay dividends in the future.
b. Calculate the net profit of Mars Corporation with the condition of the net profit margin is 5 percent. What is the value of equity at the end? Also calculate the new sustainable sales growth. Give your opinion
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