The Country Faire Company wants achieve $5 million in additional sales. They believe that they can...
The Country Faire Company wants achieve $5 million in additional sales. They believe that they can raise $300,000 in additional funding from investors and that vendors will extend an additional $200,000 in credit. If the firm pays out 40% of earnings as dividends and profit margin is 10% on the additional sales, then how much can they afford to spend on assets to make this plan work?
| $375,000 |
| $500,000 |
| $600,000 |
| $675,000 |
| $800,000 |
Homework Answers
Net income=sales*profit margin
=5000000*10%
=500000
retained earnings=net income*(1-dividend rate)=500000*(1-40%)=300000
how much can they afford to spend on assets to make this plan work
=raise additional funding from investors+retained earnings+credit from vendors
=300000+300000+200000
=800000
the above is answer..
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