problem: System computers make bulk purchases of small computers, stock them in conveniently located warehouses, & ships them into its chain of retail stores. System's balance sheet as of December 31, 2006, is shown here [millions of dollars]:
|
Cash
|
mce_markernbsp; 3.5
|
Accounts payable
|
mce_markernbsp; 9.0
|
|
Receivable
|
26.0
|
Notes payable
|
18.0
|
|
Inventories
|
58.0
|
Accruals
|
8.5
|
|
Total current assets
|
$87.5
|
Total current liabilities
|
$ 35.5
|
|
Net fixed assets
|
35.0
|
Mortgage loan
|
6.0
|
|
|
|
Common stock
|
15.0
|
|
|
|
Retained earnings
|
66.0
|
|
Total assets
|
$122.5
|
Total liabilities and equity
|
$122.5
|
Sales for 2006 were 3.50 million dollar, while net income for the year was 20.5 million dollar. System pay dividends of $4.2 million to common stockholders. The firm is operating at full capacity. Suppose that all ratios remain constant.
[A] If sales are projected to increase by 70 million dollar, or 20%, during 2007.
[B] Estimate System's projected external capital requirement if the increase in sales is expected to be carried out without any expansion of fixed assets.
[C] How much can sales grow above 2006 of $350 million without requiring any additional funds?