Homework Answers
Solution:
It is given that sales S0 = $6331 and growth = 11% so S1 = S0 *(1+11%) = 6331*(1+11%) = 7027.41
Asset = $15,286. Net profit margin = 19% and dividend payout = 0%
The formula for calculation of External fund needed is
EFN = Asset (Directly related to sales) / S0 * (S1-S0) - Liability (Directly related to sales) / S0 * (S1-S0) - Net profit margin * S1 * Retention rate
EFN = $15,286 / 6331 *(7027.41- 6331) - 0 (it is given that liability is not associated to sales) - 19% * 7027.41
EFN = 1681.46 - 1335.2079 = 346.25
So correct answer is option C) 346
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