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You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), 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 25%, 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 Last year's accruals $20.0 Last year's profit margin = PM 20.0% Initial payout ratio 10.0%

You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), 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 25%, 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 Last year's accruals $20.0 Last year's profit margin = PM 20.0% Initial payout ratio 10.0%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 9P
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You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), 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 25%, 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 Last year's accruals $20.0
Last year's profit margin = PM 20.0% Initial payout ratio 10.0%

 

Select the correct answer.

  a. $13.7  
  b. $12.6  
  c. $15.9  
  d. $14.8  
  e. $11.5  
 
 
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