Question
Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2013, is shown here (millions of dollars):
| Cash |
$ 3.5 |
|
Accounts payable |
$ 9.0 |
| Receivables |
26.0 |
|
Notes payable |
18.0 |
| Inventories |
58.0 |
|
Line of credit |
0 |
| Total current assets |
$ 87.5 |
|
Accruals |
8.5 |
| Net fixed assets |
35.0 |
|
Total current liabilities |
$ 35.5 |
|
|
|
Mortgage loan |
6.0 |
|
|
|
Common stock |
15.0 |
|
|
|
Retained earnings |
66.0 |
| Total assets |
$122.5 |
|
Total liabilities and equity |
$122.5 |
Sales for 2013 were $325 million and net income for the year was $9.75 million, so the firm's profit margin was 3.0%. Upton paid dividends of $3.9 million to common stockholders, so its payout ratio was 40%. Its tax rate is 40%, and it operated at full capacity.
Assume that all assets/sales ratios, spontaneous liabilities/sales ratios, the profit margin, and the payout ratio remain constant in 2014. Do not round intermediate calculations.
If sales are projected to increase by $40 million, or 12.31%, during 2014, use the AFN equation to determine Upton's projected external capital requirements. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
$ 6.35 million
Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.
___________%