The following question concerns the clothing retail company RNB, which operates a number of subsidiaries such as

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The following question concerns the clothing retail company RNB, which operates a number of subsidiaries such as Polarn & Pyret, Department & Stores (NK stores) and Brothers. RNB's financial performance has not been to the delight of the owners and earlier this year some of the subsidiaries were restructured. The outcome after 2019 (the company has actually broken the financial year but we start from the calendar year) looks as follows:

Income statement 2019 (in million swedish kronor)

Revenue 2296

Operating expenses -2406

Operating profit -110

Interest Income 2

interest expenses -34

Profit before tax -142

Tax 22% 0

Net result -142

Balance sheet

Fixed assets 480

Current assets 632

Total assets 1112

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Equity 235

Loan 455

Non-interest-bearing liabilities 422

Total liabilities and equity 1112

a) If we read about RNB's financial targets, it appears that they have a group target for a profit margin of 5% and a dividend policy which states that 40% of the profit shall be distributed. Let us assume that RNB reaches the margin target during the year 2020 and that the capital turnover rate (on capital employed) is unchanged compared with 2019. What growth in equity would this mean for the year 2020? Assume an unchanged interest rate situation (in%) and that the tax is 22%

b) Reconstructions often mean that loans and other liabilities are negotiated and in some cases partially written off (so-called composition). Let us assume that RNB's balance sheet after the restructuring changes as interest-bearing loans decrease by SEK 150 million in loans and that SEK 50 million is added to equity and that SEK 100 million of the inventory value is written down. Negotiations with suppliers reduce operating costs by SEK 200 million on an annual basis and interest costs are reduced to SEK 22 million. Let us also assume that these changes were implemented at New Year 2019/2020 and that sales and interest income will be the same in 2020 as in 2019. Can RNB resume the share dividend in 2020 if the requirement from the restructurers is that equity must increase by 15% by 2020? If so, how much dividend can they pay?