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galehouse gas stations inc. expects sales to increase from 1,550,000 to 1,750,000 next year. Galegouse believes that net assets (assests-liabilities) will represent 50% of sales . his firm has an 8% return in sales and pays 45 percent profits out as dividends. what effect will this growth have on funds

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Given :

expecting sales to increase from 1,550,000 to 1,750,000 next year.

So, net sales = 1,750,000 - 1,550,000 = 200,000

net assets = 50% of the sales = 0.5 * 200,000 = 100,000

the return of firm = 8% of 100,000 = 8,000

profit = 45% of 100,000 = 0.45 * 100,000 = 45,000

So, the increase on funds = 100,000 - ( 8000 + 45,000 ) = 47,000

Part B: if the dividend payout is only 25 % what will the growth have on funds

So, dividend = 25% of 100,000 = 0.25 * 100,000 = 25000

So, the growth of the funds = 100,000 - ( 8000 + 25000 ) = 67,000

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