Submitted by: Submitted by chronod514
Views: 14
Words: 442
Pages: 2
Category: Business and Industry
Date Submitted: 12/07/2015 11:44 AM
EFIN, hw5
Dr. Wei Feng
1. [Sales Growth Rates, Sales, and Profits] Petal Providers Corporation opens and operates “mega” floral stores in the U.S. The idea behind the super store concept is to model the U.S. floral industry after its European counterparts whose flower markets generally have larger selections at lower prices. Revenues were $1 million with net profit of $50,000 last year when the first “mega” Petal Providers floral outlet was opened. If the economy grows rapidly next year, Petal Providers expects its sales to growth by 50 percent. However, if the economy exhibits average growth, Petal Providers expects a sales growth of 30 percent. For a slow economic growth scenario, sales are expected to grow next year at a 10 percent rate. Management estimates the probability of each scenario occurring to be: rapid growth (.30); average growth (.50), and slow growth (.20). Petal Providers net profit margins are also expected to vary with the level of economic activity next year. If slow grow occurs, the net profit margin is expected to be 5 percent. Net profit margins of 7 percent and 10 percent are expected for average and rapid growth scenarios, respectively.
A. Estimate the average sales growth rate for Petal Providers for next year.
2. [Sustainable Sales Growth Rates and Additional Funds Needed] The Minoso Corporation anticipates a 20 percent increase in sales for 2014 over its 2013 level. Minoso is currently operating at full capacity and thus expects to increase its investment in both current and fixed assets in order to support the increase in forecasted sales.
Minoso Corporation
Income Statement for December 31, 2013
(Thousands of Dollars)
_________________________________
Sales $15,000
Operating expenses -13,000
EBIT 2,000
Interest 400
EBT 1,600
Taxes (40%) 640
Net income 960
Cash dividends (40%)...