Cash $ 340,000

Accounts Payable $ 2,720,000

Receivables 4,200,000

Accruals 980,000

Inventories 4,960,000

Notes Payable 1,300,000

Total Current Assets $ 9,500,000

Total Current Liabilities $ 5,000,000

Net Fixed Assets 2,500,000

Long term Debt 2,000,000

Common Stock 3,800,000

Retained Earnings 1,200,000

Total Assets $12,000,000

Total Liabilities and Equity $12,000,000

INCOME STATEMENT

Sales $36,500,000

Less: Operating Costs 29,200,000

EBIT $ 7,300,000

Less: Interest 500,000

EBT $ 6,800,000

Less: Taxes (40%) 2,720,000

Net Income $ 4,080,000

Less: Dividends 3,500,000

Additions to Retained Earnings $ 580,000

You expect sales to increase 25% next year.

Assume you are currently operating at 90% capacity

Interest expense next year will be 16% of any interest-bearing debt balance at the beginning of the year

Dividends will double next year

Operating costs are 25% fixed and 75% variable

Days Sales Outstanding are expected to increase by 7 days next year

Days Payables Outstanding are expected to decrease by 4 days next year

Cash is expected to remain constant next year

Using a pro forma income statement to estimate the additions to retained earnings, how much external funds do you project needing to support the 25% sales growth? If the additional funds were raised using long-term debt, immediately, how would that affect your additional funds estimate? If there is a funding surplus, excess funds are used immediately to pay off in this order long-term debt, then notes payable and then common stock until the funds are exhausted. Project your income statement and balance sheet using two passes: first estimate and second estimate adjusting for funding changes