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Problem 4. (External Funds Needed 20 points total). Suppose Mariposa, Inc's Sales are projected to grow by 20% next year. It has total assets that grow proportionately with sales.Total assets are $2 million and current total sales are $1 million. The only liabilities that change with sales are accounts payable, which are currently $300,000. The profit margin and dividend payout ratio are constant. The profit margin is 15 percent and the dividend payout ratio is 60 percent. Using the "percent of sales" approach, answer the following questions.Note: There are five parts to the problem (parts A-E), broken into five "questions." For your reference, please write down your answers as you go along.Part A. By how much must assets grow to support the forecast growth in sales? (Hint: this is the first part of the formula.)

          Problem 4. (External Funds Needed 20 points total). Suppose Mariposa, Inc's Sales are projected to grow by 20% next year. It has total assets that grow proportionately with sales.Total assets are $2 million and current total sales are $1 million. The only liabilities that change with sales are accounts payable, which are currently $300,000. The profit margin and dividend payout ratio are constant. The profit margin is 15 percent and the dividend payout ratio is 60 percent. Using the "percent of sales" approach, answer the following questions.Note: There are five parts to the problem (parts A-E), broken into five "questions." For your reference, please write down your answers as you go along.Part A. By how much must assets grow to support the forecast growth in sales? (Hint: this is the first part of the formula.)

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Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

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Solved by Expert Madhur L

11/10/2023

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Part A: By how much must assets grow to support the forecast growth in sales? ** Show more…

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Problem 4. (External Funds Needed 20 points total). Suppose Mariposa, Inc's Sales are projected to grow by 20% next year. It has total assets that grow proportionately with sales.Total assets are $2 million and current total sales are $1 million. The only liabilities that change with sales are accounts payable, which are currently $300,000. The profit margin and dividend payout ratio are constant. The profit margin is 15 percent and the dividend payout ratio is 60 percent. Using the "percent of sales" approach, answer the following questions.Note: There are five parts to the problem (parts A-E), broken into five "questions." For your reference, please write down your answers as you go along.Part A. By how much must assets grow to support the forecast growth in sales? (Hint: this is the first part of the formula.)

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Transcript

00:01 Hello students, here is a question.

00:02 Bhs inc determines that sales will raise from 400 ,000 to 550 ,000 next year.

00:09 Spontaneous assets are 60 % of a sale and spontaneous liabilities are 30 % of a sale.

00:15 Bhs has 8 % of profit margin and 40 % of dividend payout ratio.

00:20 Using a percentage of sales method, what is the outside fund needed for bhs inc? so, this is our question.

00:26 Let us discuss the answer for this.

00:28 So, the first is, calculate the increase in sales.

00:34 Calculate the increase in sales.

00:41 So, the increase in sales will be new sales minus old sale.

00:46 So, the new sale is 550 ,000 minus 400 ,000 which gives us 150 ,000.

00:58 And the second thing we need to calculate, the increase in spontaneous assets.

01:05 Calculate increase in spontaneous assets due to sale.

01:20 So, that will be increase in sale into 60%.

01:23 So, increase in sale will be 150 ,000 dollars into 50 % means 0 .06, sorry 60.

01:32 So, which gives us 90 ,000.

01:36 And the next is, calculation of increase in spontaneous liability.

01:45 Calculate spontaneous liability due to sale increase.

01:57 So, that will be 150 ,000 into 40%...

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