Financial planning problems

WAL Inc. has a following ratios: A*/S=1,6; L*/S=0,4; profit margin = 10%; and dividend payout ratio = 45%. Sales last year were 100 million €. Assuming that this ratios will remain constant, use an EFR formula to determine the maximum growth rate WAL Inc. can achieve without having to employ nonspontaneous external funds?
Suppose WAL Inc. financial consultants report: (1) the inventory turnover ratio is 3 versus an industry average of 4, (2) this company can achieve the industry average level without affecting sales, the profit margin, or the other asset turnover ratios. Under these condition, use EFR formula to determine the amount of additional funds WAL Inc. would require during each of the next 2 years if sales grew at a rate of 20% per year.
The Gasp Corp. 2010 financial statement are shown below:

Balance sheet (thousands of €)

And the P&L statement (thousands of €)

		#1 iterat.	#2 iterat.	#3 iterat
Revenues (Sales)	36000
Operating costs (incl. depreciation and amortization)*	30783
Earnings before interest and taxes (EBIT)	5217
Interest	1017
Earnings before taxes (EBT)	4200
Taxes (40%)	1680
Net income (NI)	2520
Dividends (60%)	1512
Addition to retained earnings	1008

Assume that the company was operating at full capacity in 2010 with regard to all items except fixed assets; fixed assets in 2010 were being utilized to only 75% of capacity. By what percentage could 2011 sales increase over 2010 sales without the need for an increase in fixed assets?
Now suppose 2011 sales increase by 25% over 2010 sales. How much additional external capital will be required? Assume that Gasp Corp. cannot sell any fixed assets. Assume that any required financing is borrowed as notes payable. Use pro forma income statements to determine the addition to retained earnings.
Use the financial statements developed in part b to incorporate the financial feedback which result from the addition to notes payable (prepare next financial iteration). For purposes of this part, assume that notes payable’ interest rate is 12%. What is the EFR for this operation?
Suppose industry average ACP and inventory turnover ratio are 90 days 3,33 respectively, and Gasp Corp. matches this figures in 2011 and then uses funds released to reduce equity. (It pays a special dividend out of retained earnings. What will this do to the rate of return on year-end 2011 equity? Use the third pass balance sheet and income statement as developed in part C and assume that the additional EFR amount calculated in this iteration is added to notes payable.

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