INDTAP Q Search this course Score 000 Check My Work a remain

INDTAP Q Search this course Score: 000% Check My Work (a remaining) 1 9-6: Additional Funds Needed (AFN) Equation Method Sales Increase Maggie\'s Muffins, Inc, generated $4,000,000 in sales during 2015, and its year-end total assets were $3,000,000. Also, at year-end 2015, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2016, the company estimates that its assets must increase at the same rate as sales, ts spontaneous liabilites will increase at the same rate as sales, its profit margin will be 6%. and its payout ratio will be 60%. How large a sales increase can the company achieve without ng growth rate? Do not round intermediate steps. Round your answers to the nearest whole. , that is by Check My Work (1 remaining) MacBook Air

Solution

Self sustaining growth rate = (profit margin * (1 - payout ratio) * sales)/( asset - spontaneous liability - (profit margin * (1 - payout ratio) * sales))

= .06 * .04 * 4000000/(3000000 - 700000 - .06 * .04 * 4000000)

= 96000/2204000

= 4.3557%

Sales can be increased by = $4000000 * 4.3557% = $174228