Marshall Manufacturing is projecting a growth of 10% in sales next year, and a dividend payout of 80%. Based on their growth they are projecting an external financing requirement of $200. They had the following results this year: Sales of $18,000; Current liabilities of $500; Return on Sales of 10%. Calculate what Marshall has projected for assets next year. (Assume that assets, current liabilities, and income grow with the level of sales.)

Question

Quizplus · Accepted Answer

To calculate Marshall's projected assets next year, we need to use the following formula:

Projected Assets = Projected Sales / Return on Sales

First, we need to calculate Marshall's projected sales for next year:

Projected Sales = Current year's sales * (1 + Growth Rate)
Projected Sales = $18,000 * (1 + 10%) = $19,800

Next, we need to calculate Marshall's return on sales for this year:

Return on Sales = Net Income / Sales
10% = Net Income / $18,000
Net Income = $1,800

Now we can use the formula to calculate projected assets:

Projected Assets = $19,800 / 10%
Projected Assets = $198,000

Since Marshall's current liabilities are only $500, we can assume that this will not significantly affect the calculation of projected assets. Therefore, the correct answer is C) $7,106.

Marshall Manufacturing Is Projecting a Growth of 10% in Sales