corporate finance chapter 18 question 3

The 2019 financial statements for Growth Industries are presented below. 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 0.60. INCOME STATEMENT, 2019 Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net Income Dividends Addition to retained earnings $299, eee 195,000 95,000 19.ee 76. eee 15.960 60,040 $36, 024 $24,016 Assets Current assets Cash Accounts receivable Inventories Total current assets Net plant and equipment $ $ BALANCE SHEET, YEAR-END, 2019 Liabilities Current liabilities $ 5,600 Accounts payable 10,000 Total current liabilities 25, eee Long-term debt 40,000 Stockholders' equity 230,000 Common stock plus additional paid in capital Retained earnings $ 270,eee Total liabilities plus stockholders' equity 12,080 12,000 190,000 15,000 53,000 $ 270,000 Total assets Required: Construct a spreadsheet model for Growth Industries similar to the one in Spreadsheet 181. a. How much external capital will the company require in 2023? b. What will be the company's debt ratio at the end of 2023? Construct a spreadsheet model for Growth Industries similar to the one in Spreadsheet 18.1. (Do not round intermediate calculations. Round your answer to 1 decimal place. Enter your answers in thousands and Enter the "Debt ratio" rounded to 2 decimal places.) 2022 501.1| 337.0 1642 2023 601.3 404.4 197.0 A Long-Term Planning Model for Growth Industries Income Statement 2019 2020 2021 Revenue 200.0 348.0 417.81 Cost of goods sold 105.0 234.0 280.81 EBIT 95.0 050 114.0 136.8 Interest expense 19.0 Earnings before taxes 76.0 Taxes at 50% 10.0 Net income 80.0 Dividends Reinvested earnings 24.0 38.0 Balance Sheet (year-end) Assets Networking capital Net fixed assets Total assets 28.01 230.0 258.0 Liabilities and equity Long-term debt Shareholders equity 190.0 08.01 Total liab. & share. equity 258.0 Sources and Uses of Funds Operating cash flow Increase in working capital Investments in fixed assets Dividends Total uses of cash Required external financing Financial Ratios Debt ratio Interest coverage Spreadsheet Model Req A and B > The 2019 financial statements for Growth Industries are presented below. 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 0.60. INCOME STATEMENT, 2019 Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net income Dividends Addition to retained earnings $ 290,00 195, 95, eee 19, eee 76,eee 15,962 60, 848 $36,024 $24,016 Assets Current assets Cash Accounts receivable Inventories Total current assets Net plant and equipment $ $ BALANCE SHEET, YEAR-END, 2019 Liabilities Current liabilities $ 5,eee Accounts payable 1e, eee Total current liabilities 25, eee Long-term debt $ 40, Bee Stockholders' equity 230,00 Common stock plus additional paid-in capital Retained earnings $ 27e, eee Total liabilities plus stockholders' equity 12, see 12, eee 19e, eee 15. eee 53, see $ 270,eee Total assets Required: Construct a spreadsheet model for Growth Industries similar to the one in Spreadsheet 18.1. a. How much external capital will the company require in 2023? b. What will be the company's debt ratio at the end of 2023? Complete this question by entering your answers in the tabs below. Spreadsheet Model Reg A and B a. How much external capital will the company require in 2023? b. What will be the company's debt ratio at the end of 2023? (Round intermediate values to 1 decimal place. Round your answer to 2 decimal places.) a. External financing b. Debt ratio