You Have Been Asked to Forecast the Additional Funds Needed

question 2

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.

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

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Definitions:

Anxiety

A feeling of worry, nervousness, or unease, often about an imminent event or something with an uncertain outcome.

Depression

A common and serious mood disorder that negatively affects how you feel, think, and handle daily activities, often characterized by persistent feelings of sadness and loss of interest.

Future Loss

The potential for an individual or entity to experience a decrease in value or benefit in the future.

Normal Depression

A temporary state of sadness or low mood that is considered within the range of normal human emotional responses.