Reference no: EM132144477

Background information for the next two problems. Solar Home Inc. is interested in estimating its sustainable sales growth rate. Last year revenues were $1 million, the net profit was $50,000, the investment in assets was $750,000, payables and accruals were $100,000, and equity at the end of the year was $450,000 (i.e., beginning of year equity of $400,000 plus retained profits of $50,000). The venture did not pay out any dividends and does not expect to pay dividends for the foreseeable future.

1. The sustainable sales growth rate for Solar is ________.

a. 12.5%

b. 11.1%

c. 10.0%

d. 7.1%

2. If Solar Home's sales are expected to growth at a 30 percent rate next year, the estimated additional funds needed next year using the AFN formula would be ______.

a. $300K

b. $130K

c. $65K

d. 0