Howton & Howton Worldwide the Firm Is Operating at Full

question 47

Multiple Choice

Howton & Howton Worldwide 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 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* $500.0 Last year's accruals $20.0
Last year's profit margin = PM 20.0% Initial payout ratio 10.0%

• A)$31.9
• B)$33.6
• C)$35.3
• D)$37.0
• E)$38.9

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Definitions:

GE/McKinsey

A strategic business tool developed by McKinsey & Company for General Electric to evaluate business portfolio and make investment decisions.

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The process of bringing new, improved products or services to market or introducing unique features to existing products.

Peter Drucker

A highly influential thinker and writer on management theory and practice, known for his contributions to the modern business corporation.