Consider the following most recent financial statements for Smith Company. Assume that for next year 2010, the net income is projected to be $1,000 (in millions). Smith companys dividend payout ratio is 30%. Assets are assumed to grow at 20%, except that the company will strictly enforce the policy of collecting the receivables in 30 days. Also, the company will pay its suppliers in 15 days. Without any further borrowing of long-term debt and no equity financing, how much further notes payable does the company need next year? Assume that in 2010, the sales will be $3,600 (in millions), and the COGS will be $2,160 (in millions).

Smith Company

Income Statement

During 2009

($ in millions)

Net sales $3,000 Cost of goods sold 1,800 EBIT $1,200 Interest expenses 300 EBT 900 Taxes 270 Net Income $630 Smith Company Balance Sheets 12/31/2009 ($ in millions) Cash $150 Accounts payable $450 Accounts receivable 500 Notes payable 600 Inventory 350 Current Liab. $1,050 Current Assets $1,000 Long-term debt 1,500 Net fixed assets 3,500 Owners' Equity 1,950 Total Assets $4,500 Total SE and Liab. $4,500