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INCOME STATEMENT, 2017 Sales $ 210,000 Costs 155,000 EBIT $ 55,000 Interest expen

INCOME STATEMENT, 2017 Sales $ 210,000 Costs 155,000 EBIT $ 55,000 Interest expen

INCOME STATEMENT, 2017

Sales

$

210,000

Costs

155,000

EBIT

$

55,000

Interest expense

11,000

Taxable income

$

44,000

Taxes (at 35%)

15,400

Net income

$

28,600

Dividends

$

14,300

Addition to retained earnings

14,300

 

BALANCE SHEET, YEAR-END, 2017

Assets

Liabilities

Current assets

Current liabilities

Cash

$

4,000

Accounts payable               

$

11,000

Accounts receivable

9,000

Total current liabilities

$

11,000

Inventories

27,000

Long-term debt

110,000

Total current assets

$

40,000

Stockholders’ equity

Net plant and equipment

150,000

Common stock plus additional paid-in capital

15,000

Retained earnings

54,000

Total assets

$

190,000

Total liabilities and stockholders' equity

$

190,000

 

Sales and costs are projected to grow at 20% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.50.

What is the required external financing over the next year? (Negative amounts should be indicated by a minus sign.)

INCOME STATEMENT, 2017

 

Sales

 

 

 

$

210,000

 

 

Costs

 

 

 

 

155,000

 

 

EBIT

 

 

 

$

55,000

 

 

Interest expense

 

 

 

 

11,000

 

 

Taxable income

 

 

 

$

44,000

 

 

Taxes (at 35%)

 

 

 

 

15,400

 

 

Net income

 

 

 

$

28,600

 

 

Dividends

$

14,300

 

 

 

 

 

Addition to retained earnings

 

14,300

 

 

 

 

 

 

 

               

 

Abhinav 04-Dec-2019

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