The financial statements of Eagle Sport Supply are shown in Table 29.17. For simplicity, Costs include interest.

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The financial statements of Eagle Sport Supply are shown in Table 29.17. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales.
a. Find Eagle's required external funds if it maintains a dividend payout ratio of 60% and plans a growth rate of 15% in 2015.
b. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item? What will its value be?
c. Now suppose that the firm plans instead to increase long-term debt only to $1,100 and does not wish to issue any new shares of stock. Why must the dividend payment now be the balancing item? What will its value be?
TABLE 29.17
The financial statements of Eagle Sport Supply are shown in
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Principles of Corporate Finance

ISBN: 978-0078034763

11th edition

Authors: Richard Brealey, Stewart Myers, Franklin Allen

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