Jane\'s Wigs Inc. had the following balance sheet last year: Jane has just inven

Question

Jane's Wigs Inc. had the following balance sheet last year: Jane has just invented a non-slip wig for men which she expects will cause sales to triple from $10,000 to $30,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1) Will Jane need any outside capital if she pays out 20% of net income as dividends dividends? (2) If so, how much? Jane's Wigs Inc. had the following balance sheet last year: Jane has just invented a non-slip wig for men which she expects will cause sales to triple from $10,000 to $30,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1) Will Jane need any outside capital if she pays out 70% of net income as dividends dividends? (2) If so, how much? Brown & Sons recently reported sales of $100 million, and net income equal to $5 million. The company has $70 million in total assets. Over the next year, the company is forecasting a 20 percent increase in sales. Since the company is at full capacity, its assets must increase in proportion to sales. The company also estimates that if sales increase 20 percent, spontaneous liabilities will increase by $3.2 million. If the company's sales increase, its profit margin will remain at its current level. The company's dividend payout ratio is 60 percent. Based on the AFN formula, how much additional capital must the company raise in order to support the 20 percent increase in sales?

Explanation / Answer

C. Yes; $2,900 D. No; there will be a $2,400 surplus. D. $ 9.6 million
D. No; there will be a $2,400 surplus. D. $ 9.6 million
D. $ 9.6 million

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