In: Finance
Problem 9-2
AFN equation
Broussard Skateboard's sales are expected to increase by 20%
from $8.2 million in 2015 to $9.84 million in 2016. Its assets
totaled $4 million at the end of 2015. Broussard is already at full
capacity, so its assets must grow at the same rate as projected
sales. At the end of 2015, current liabilities were $1.4 million,
consisting of $450,000 of accounts payable, $500,000 of notes
payable, and $450,000 of accruals. The after-tax profit margin is
forecasted to be 5%, and the forecasted payout ratio is 65%. What
would be the additional funds needed? Do not round intermediate
calculations. Round your answer to the nearest dollar.
$
Assume that the company's year-end 2015 assets had been $5
million. Is the company's "capital intensity" ratio the same or
different?
-Select-IIIIIIIVItem 2
I. The capital intensity ratio is measured as
A0*/S0. Broussard's capital intensity ratio
is higher than that of the firm with $5 million year-end 2015
assets; therefore, Broussard is less capital intensive - it would
require a larger increase in total assets to support the increase
in sales.
II. The capital intensity ratio is measured as
A0*/S0. Broussard's capital intensity ratio
is lower than that of the firm with $5 million year-end 2015
assets; therefore, Broussard is more capital intensive - it would
require a larger increase in total assets to support the increase
in sales.
III. The capital intensity ratio is measured as
A0*/S0. Broussard's capital intensity ratio
is lower than that of the firm with $5 million year-end 2015
assets; therefore, Broussard is more capital intensive - it would
require a smaller increase in total assets to support the increase
in sales.
IV. The capital intensity ratio is measured as
A0*/S0. Broussard's capital intensity ratio
is higher than that of the firm with $5 million year-end 2015
assets; therefore, Broussard is less capital intensive - it would
require a smaller increase in total assets to support the increase
in sales.