Q3 Please answer the questions below, thank you!

Question 3 (20 points) 3. Answer the following three independent questions. a. [12 points] Ambex Inc. expects sales to increase to $36 million next year, from $27 million this year. Its current assets are currently $9 million, its account payable $2.7 million, its xed assets $9 million, its long-term debt $3.6 million, its owners' equity $11 million, and its earnings after tax to sales ratio is 5 percent. Current assets and accounts payable can be assumed to increase in the same proportion as sales. Other current liabilities are expected to stay at the same level. Net fixed assets will increase by $1 million, and the firm plans to pay $800,000 as dividends. i. What are Ambex total additional investment needs for next year? ii. How much money Ambex would have to borrow to finance its needs b. [5 points] Amberscme Inc. has decided against borrowing and have all its assets financed by equity. Further it intends to keep its payout ratio at 40 percent. Its assets turnover ratio is .9, its profit margin dened as earnings before interest and tax divided by sales is 8 percent and its profits are taxed at 40 percent. The firm's target growth rate in sales is 5 percent. i. Is the target growth rate consistent with the rm's financing policy? ii. If not, suggest what the management in order to meet the target growth rate? c. [3 points] Trade credit is often portrayed as a marketing tool of the rm. One of the responsibilities of the financial executive is to ensure that the credit terms that the rm offers are desirable. Briey explain why trade credit is viewed as a marketing tool of the rm