Question
Crum Cos balance sheet and income statement for 2001 are given below. The firm expects sales to grow by 50% in 2002. Operating costs, spontaneous
Crum Cos balance sheet and income statement for 2001 are given below. The firm expects sales to grow by 50% in 2002. Operating costs, spontaneous liabilities and assets will increase in proportion to sales. The company plans to finance any additional funds needed using debt at an interest rate of 10%. What is the companys projected funds needed for 2002? Assume interest expenses are 10% of the beginning year of debt balance.
2001 2002 1st pass 2002 2nd pass
Sales $1,000
Operating costs 800
EBIT 200
Interest 16
EBT 184
Taxes (40%) 73.6
Net Income 110.40
Dividends (60%) 66.24
Addn. To RE 44.16
Cash 30
A/R 150
Inventories 200
Total CA 380
Gross FA 700
Accum.Depreciation 80
Net FA 620
Total assets 1000
A/P and accruals 150
Debt 200
Common stock 150
Retained Earnings 500
Total Liab.& Equity 1000
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