Al –Shamal Co is operating successful trading activities in the Middle East. Diversification and rational expansion are considered as key successful factors. The expected expansion in FA is 10%, whereas the projected + change in NWC is 12%. The total assets of the company in year x amounted to $42,000,000; CL equals 0.25 CA. CL amounted to $8,000,000. The depreciation rate is 10% in year x and projected to be 9% in x1. Equity in year (x) amounted to $34000, 000. Due to stagnation in stock market, the co is unlikely to issue new shares in year (x1). Accordingly the DPR is decided to be zero

Required:

1. Based on EFM model, provide advice to the Company on expected change on debts, provided that ROTA is 0.072.
2. Figure out the implications on TA, TL, and equity of the company
3. Find out êD under the assumption that ROTA will go up by 16%

Answer rating: 100% (QA)

Based on E FM model provide advice to the Company on expected change on debts provided that R OTA is ... View the full answer