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range, Incorporated Balance Sheet (in dollars) for the Year Ending December 31, 2017 Cash 2,000 Notes payable 2,000 A

range, Incorporated

Balance Sheet (in dollars) for the Year Ending December 31, 2017


  • Cash                                     2,000              Notes payable                                   2,000
  • Accounts receivable            3,000             Accounts payable                             4,000
  • Inventory                              9,000              Accruals                                            3,000
  • Current assets                     14,000            Current liabilities                             9,000
  • Net fixed assets                  36,000          LT Debt 1                                            4,000
  • Total assets                         50,000          Common stock ($2.00 par value)      4,000           

                                                                               Additional paid in capital                 10,000

                                                                               Retained earnings                           13,000

                                                                               Total liabilities & equity                     50,000



Sales for 2017 were $250,000. The 2018 projected net profit margin is 6.5%. Orange plans to pay a dividend of $2.65 per share in 2018. Cash will grow at 40 percent of the growth rate in sales, accounts receivable will grow at 85 percent of the growth rate in sales, inventory will grow at 120 percent of the growth rate in sales, net fixed assets will grow as a percent of sales, accounts payable and accruals will grow as a percent of sales, and long-term debt will increase by 65 percent of the growth in net fixed assets. All other financing accounts will remain constant. Based on these assumptions, compute Orange Company's Sustainable Growth Rate.   



Sales for 2017 were $. The 2018 projected net profit margin is 3.75%. Orange always pays out 80 percent of net income as dividends every year (they play to do so again in 2018). Cash will grow at 75 percent of the growth rate in sales, accounts receivable will grow at 85 percent of the growth rate in sales, inventory will grow at 95 percent of the growth rate in sales, net fixed assets will grow by 50 percent of the growth rate in sales, ALL current liabilities will grow as a percent of sales and long-term debt will increase by 60 percent of the growth in net fixed assets. All other financing accounts will remain constant. Based on these assumptions, compute Orange Company's Sustainable Growth

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