Hungry Howie's Is Currently Operating at Full Capacity

question 20

Multiple Choice

Hungry Howie's is currently operating at full capacity. The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 11 percent. What is the external financing needed?

• A)-$196.50
• B)-$148.00
• C)-$97.20
• D)-$14.50
• E)$26.80

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Definitions:

Book Values

The net value of a company's assets, excluding any liabilities, typically used to determine its financial strength.

Market Values

The current cost at which assets or services are traded on the open market.

CAPM Approach

Capital Asset Pricing Model, a framework used to determine the theoretical appropriate required rate of return of an asset, considering risk and the cost of capital.

Retained Earnings

The portion of a company's net income that is kept within the company rather than distributed to shareholders as dividends.