Galehouse Gas Stations Inc. expects sales to increase from $1,540,000 to $1,740,000 next year. Galehouse believes that net assets (Assets − Liabilities) will represent 45 percent of sales. His firm has an 11 percent return on sales and pays 60 percent of profits out as dividends.
a. What effect will this growth have on funds?
b. If the dividend payout is only 25 percent, what effect will this growth have on funds?
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