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Eagle Sports Supply has the following financial statements. Assume that Eagles assets are proportional to its sales INCOME STATEMENT

Eagle Sports Supply has the following financial statements. Assume that Eagle’s assets are proportional to its sales.

INCOME STATEMENT, 2015
  Sales $ 1,600  
  Cost   310  
  Interest   50  
  Taxes   260  
       
  Net income $ 980  
       
 
BALANCE SHEET, YEAR-END
    2014   2015       2014   2015  
  Assets   $ 4,100     $ 4,400     Debt   $ 1,400     $ 1,500    
                    Equity     2,700       2,900    
                                       
  Total   $ 4,100     $ 4,400     Total   $ 4,100     $ 4,400    
                                       
 
a.

Find Eagle’s required external funds if it maintains a dividend payout ratio of 70% and plans a growth rate of 20% in 2016. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  External funding need $   
b-1.

If Eagle chooses not to issue new shares of stock, what variable must be the balancing item?

   
 
  Debt
  Interest
  Dividends
b-2.

What value will appear on the adjusted balance sheet for the balancing variable? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Value $   
c.

Now suppose that the firm plans instead to increase long-term debt only to $1,600 and does not wish to issue any new shares of stock. What will be the value of dividend payment now? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

  Dividend $  

Apr 08 2020 View more View Less

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