You Have Been Asked to Forecast the Additional Funds Needed

question 8

Multiple Choice

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 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. $\begin{array}{lc}\text { Last year's sales }=S_{0} & \$ 300.0 \text { Last year's accounts payable }&\$50.0 \\\text { Sales growth rate }=g & 40 \% \text { Last year's notes payable } &\$15.0\\\text { Last year's total assets }=A_{0} * & \$ 500.0 \text { Last year's accruals } &\$20.0\\\text { Last year's pro fit margin }=\text { PM } & 20.0 \% \text { Initial payout ratio }&10.0\%\end{array}$

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

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Definitions:

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The process in which energy and resources are used, often referring to the intake of food by organisms.

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An agricultural practice focused on raising cattle for meat, milk, or other products, typically involving extensive land use for grazing.

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Describes wood that has been processed into beams and planks, a stage in the process of wood production.

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